Interest on PPF, Savings Bank Deposit to be Included for Calculating GST Registration Threshold: AAR

The value of exempted income, like interest on PPF, savings bank account and loans given to family/friends, will be included along with taxable supplies while calculating the threshold limit for obtaining GST registration, the Authority for Advance Ruling (AAR) has said.

Under the Goods and Services Tax law, businesses and individuals are required to obtain GST registration if their aggregate turnover is Rs 20 lakh or more.

An individual, not engaged in any business, had filed an application before the Gujarat bench of AAR asking whether interest received from savings bank, PPF and loans and advances to family would be considered for the purpose of calculating threshold limit of Rs 20 lakh for registration under GST law.

The individual, in his application, had disclosed that his total receipts in 2018-19 fiscal were about Rs 20.12 lakh, including rent receipt of Rs 9.84 lakh, while the remaining was interest on bank, PPF deposits and from personal loans extended to friends/family.

The AAR, while ruling that interest income would be included for calculating registration threshold, said that the applicant is required to consider the value of both taxable supply i.e. "renting of immovable property" and exempted supply of service provided by way of extending deposits, loans or advances for which he earned interest income, to arrive at "aggregate turnover" to determine the threshold limit for the purpose of obtaining registration under the GST Act.

"We conclude that the Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF & Bank Saving accounts and loans and advances given to his family/friends along with the value of the taxable supply i.e. 'Renting of immovable property' for the purpose of calculating the threshold limit of Rs.20 Lakh for obtaining registration under GST law," the AAR said.

AMRG & Associates Senior Partner Rajat Mohan said this ruling may lead to homemakers, retired persons and freelancers taking GST registration.

"The Authority failed to distinguish between earnings made in the individual capacity and in the business capacity," Mohan added.