Inclusion or Exclusion of Interest on SB or FD or PPF or Loan given, in the Turnover for GST

As per the Section 2(6) of CGST Act, 2017 “Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

From the above definition it is clarify that all the supplies whether taxable or exempt are included in the Aggregate turnover.

Now as per Section 2(47) of CGST Act, 2017 “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

As per Notification No. 12/2017 C.T.R Dt. 28.06.2017, Services by way of,

(a) Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services).

(b) Inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.

Shall attract NIL rate of GST.

Hence plain reading if above definition it is concluded that interest on SB or FD or PPF or Loan given shall be exempt income and included in Turnover for the purpose of GST.

Now question is raised that interest earned from personal saving shall be the part of GST Turnover or not?

Goods and Services Tax [GST] has been imposed on "supply of goods or services". That means for the purpose of imposition of GST there has to be supply, if there is no supply then no GST will be impose.

As per the Section 7(1)(a) “supply” includes,

(a) All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

From the above definition it is clear that the condition of “in the course or furtherance of business” is required to be fulfilled for supply under section 7(1)(a)

If you look in to the definition of "Business" as mentioned in Section 2(17) of CGST Act, 2017, the receipts from personal loans and advances, deposits and Bank Interest are not covered under term Business.

CONCLUSION:- As per my Opinion I conclude as below.

1) If the interest is earned in "Business Capacity" then such interest shall be the part of Aggregate Turnover.

2) If the interest is earned in "Personal Capacity" then such interest shall not be part of Aggregate Turnover.

As it is not at all supply then it cannot be considered in the ambit of exempt supply. Because exemption cannot be given for the transaction which is not at all part of supply or which is not at all taxable transaction.

DISCLAIMER:-

This is strictly my personal opinion. Above discussion cannot be considered as our professional or legal advice. Users shall consider legal provisions or take advice from experts before taking action on it.

However as per the Gujarat AAR Decision in case of Shree Sawai Manoharlal Rathi it has been ruled that Interest on PPF and SB and on Personal Loans and Advanced to family/friends would be considered while calculating the "Aggregate Turnover".

Name - Shree Sawai Manoharlal Rathi.
Advance ruling No: GUJ/GAAR/R/2020/10
State: Gujarat.
Date: 19.04.2020.