Interest on PPF, savings to be used for calculating GST registration: AAR

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

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

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

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

The AAR said, “We conclude that the Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF and Bank Saving accounts and loans and advances given to his family or 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.”

Commenting on this ruling, AMRG and Associates Senior Partner Rajat Mohan said that this ruling may lead to homemakers, retired persons, and freelancers taking GST registration. He further added, “The Authority failed to distinguish between earnings made in the individual capacity and in the business capacity.”

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