Bank Interest in Audited Turnover in GST
When we perform GST Audit, then why do we need to add bank interest (personal) in the audited turnover figure, in turnover reconciliation table, when it is not a supply under GST?
Answer:
In GST ‘supply’ as defined in section 7 of the CGST Act, 2017 has to be considered as a taxable event for charging GST. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to decide GST’s applicability. Accordingly, the supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of supply under GST.
To be taxable, the following tests are essential :
- Supply is done for a consideration, and
- Supply is done in course of furtherance of business.
Notification No. 12/2017-Central Tax (Rate) and Notification No.9/2017-Integrated Tax (Rate), both dated 28.06.2017, as amended, provides a list of services exempted from payment of Central Tax on intra-State supply and Integrated Tax on inter-state supply.
Entry 27(a) of the Notification No. 12/2017 and Entry 28(a) of the Notification No. 9/2017 relates to services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest.
The services regarding interest income are covered under the above Notification. Therefore, such services are exempted from payment of GST and the individual is not required to discharge GST on the activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest. Therefore, in given case GST was not leviable on interest income earned by the Applicant.
Thus, in the case of Authority for Advance Ruling (AAR), Gujarat in Re: Shree Sawai Manoharlal Rathi (2020) 6 TMI 449; (2020) 117 taxmann.com 497 (AAR, Gujarat). It was concluded 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 for the purpose of calculating the threshold limit of Rs. 20,00 lakh for obtaining registration under GST law.
It can therefore, be concluded on the basis of Advance Ruling that interest, irrespective of nature is part of aggregate turnover and therefore, to be considered for the purpose of registration.
Expert Details
The said query was answered by our GST Expert Amrita Peshori
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