QUESTION

In case of an individual, will `aggregate turnover` (for checking 20 Lakhs / 40 Lakhs limit) include : a) interest income (i.e. Bank Fixed Deposits, on PPF deposit, Saving Bank Accounts, Govt. Bonds, NCDs etc); b) Income from Partnership firms (Remuneration, Interest on capital, profit share)?

ANSWER

Facts of the case: Whether aggregate turnover includes interest income or income from partnership firm.

Law Applicable: SECTION 2 OF CGST ACT

(6) '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;

Removal of Difficulty ORDER No. 01/2019-Central Tax

2. For the removal of difficulties, it is hereby clarified that the value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account -

(i) for determining the eligibility for composition scheme under second proviso to sub-section (1) of section 10;

(ii) in computing aggregate turnover in order to determine eligibility for composition scheme.

Interpretation: As per the definition, Aggregate turnover includes exempt supplies also. Therefore for determining threshold under GST, interest income is included as Supply of exempt services.

However As per Removal of Difficulty Order No. 01/2019 it is clarified that  value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account in computing aggregate turnover in order to determine eligibility for composition scheme.

There is no such relief or relaxation in cases other than Composition Suppliers.

So far as income from Partnership firm is concerned, it is appropriation of profits and not consideration for any supply. Thus it will not be included in Aggregate turnover rather it will be taxed under the provisions of Income Tax Act.

Conclusion: Aggregate turnover includes interest Income in all cases except for composition scheme but does not include income or interest received by partner from partnership firm.(Reply dt.24-04-2020)