GST Registration: Interest, Rent, and Other Income to be
Included in Aggregate Turnover – Karnataka AAR Ruling
The Karnataka Authority
for Advance Ruling (AAR) has ruled on a crucial issue for individuals receiving
multiple sources of income: Which incomes should be included in the
"aggregate turnover" for GST registration? The decision in the
case of M/s Anil Kumar Agrawal clarifies the treatment of interest
income, rental income, salary from directorships, dividends, capital gains, and
insurance proceeds under the GST regime.
Background
of the Case
The applicant, Mr.
Anil Kumar Agrawal, an unregistered individual from Bangalore,
approached the AAR seeking clarity on whether various types of income or
revenue received by him should be counted towards the aggregate turnover
threshold of ₹20 lakhs for GST registration.
He listed 21 types of
income, including:
- Partner’s salary
- Salary as director from a company
- Interest income (from loans,
deposits, PPF, NSCs, PF, etc.)
- Rental income (commercial and
residential)
- Maturity proceeds from life insurance
- Dividend on shares
- Capital gains/loss on sale of shares
The main question raised
was: Which of these income streams should be included in the aggregate
turnover for GST registration?
Legal
Framework: Understanding Aggregate Turnover
The term “aggregate
turnover” is defined under Section 2(6) of the CGST Act, 2017. It
includes:
- Taxable supplies
- Exempt supplies
- Exports
- Inter-State supplies
It excludes inward
supplies liable to reverse charge and all forms of GST taxes (CGST, SGST, IGST,
UTGST, Cess).
Importantly, both
taxable and exempt supplies are considered for the purpose of determining
the registration threshold, which is ₹20 lakhs for most states.
Key
Observations and Rulings of the Authority:
1. Interest
Income from Deposits, Loans, Advances
- Income from interest (on loans, FDs,
PPF, debentures, NSCs, etc.) is exempt under Entry 27(a) of
Notification No. 12/2017-Central Tax (Rate).
- However, such interest income arises
from supply of exempt services, and therefore, must be included
in the aggregate turnover for GST registration.
Ruling:
Included in aggregate turnover.
2. Rental
Income
(a) Rent from Commercial
Property
- Taxable under GST as per SAC 997212.
- Deemed as a taxable supply of
service.
Ruling:
Included in aggregate turnover.
(b) Rent from Residential
Property
- Exempt under Entry 12 of
Notification No. 12/2017-Central Tax (Rate).
- Still considered an exempt supply,
and thus part of aggregate turnover.
Ruling:
Included in aggregate turnover (even though exempt).
3. Salary
as Director of a Company
- Two possibilities were considered:
- If the applicant is an Executive
Director (employee): remuneration is treated as salary, not a
supply — not included in turnover.
- If the applicant is a Non-Executive
Director (not employee): remuneration is treated as a taxable
supply, though taxable on a reverse charge basis in the hands
of the company.
Ruling:
- Executive Director salary – Not
included
- Non-Executive Director remuneration –
Included in aggregate turnover
4.
Partner’s Salary from Partnership Firm
- If the salary is for being a working
partner, or the income is share of profit, it is not treated
as supply under Schedule III.
- It is regarded as application of
money, not a supply of service.
Ruling:
Not included in aggregate turnover
5. Dividend
from Shares
- Dividends pertain to securities,
which are excluded from the definition of goods/services under GST
law.
- Income from securities is outside
the purview of GST.
Ruling:
Not included in aggregate turnover
6. Capital
Gains or Loss from Shares
- Like dividends, these arise from transactions
in securities, which are not treated as supply.
Ruling:
Not included
7. Maturity
Proceeds of Life Insurance
- Once the policy matures, no further
service is being provided by the insurance company.
- The proceeds are a result of a contract
completed, and hence do not involve any taxable supply.
Ruling:
Not included
Final
Ruling Summary
The AAR ruled that the
following incomes are to be included in aggregate turnover for
the purpose of determining GST registration eligibility:
1. Interest
income from loans, advances, FDs, PPF, debentures, NSCs, PF,
etc. – Included (exempt supply)
2. Rent
from commercial property – Included (taxable supply)
3. Rent
from residential property – Included (exempt supply)
4. Remuneration
as Non-Executive Director – Included (taxable under
reverse charge)
Other income sources such
as salary from a firm/company (as an employee), dividend on shares, capital
gains, and insurance maturity proceeds were excluded, as they do not
qualify as supplies under GST.
Conclusion
The Karnataka AAR ruling
in the case of M/s Anil Kumar Agrawal provides a clear interpretation of
how different types of income affect an individual's GST registration
eligibility. The key takeaway is that exempt supplies are still part of
aggregate turnover, and non-taxable supplies related to securities or
mere application of money are excluded.
Individuals earning
interest, rental income, or sitting fees must carefully evaluate their total
receipts—taxable or exempt—to determine whether they are liable to register
under GST.
This ruling serves as a
critical guide for professionals, investors, landlords, and even directors of
companies to assess their compliance obligations under GST law.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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