Gujarat AAR: Interest on PPF & SB Accounts Included in Aggregate Turnover for GST Registration

The Gujarat Authority for Advance Rulings (AAR) has directed that any interest or income earned on the Public Provident Fund (PPF), savings bank account, and extended deposits/advances shall be included while computing the aggregate turnover under GST. The recent ruling could potentially put individuals into jeopardy with no clear distinction between personal and business purpose outlined by the authorities.

The ruling comes after an individual, Shree Sawai Manoharlal Rathi, who is not engaged in any business applied to AAR’s Gujarat bench. He asked whether interest earned from the savings bank, PPF, and loans and family advances will be considered for calculating the threshold limit of Rs 20 lakh for registration under GST legislation.

He had disclosed in the application that his total receipts in the financial year 2018-19 were about Rs 20.12 lakh, where Rs 9.84 lakh accounted for rent receipt, while the rest were interest on the bank, PPF deposits, and personal loans extended to friends/family.

The Gujarat AAR asserted that the applicant must consider both taxable and exempt supplies for arriving at the aggregate turnover. In this case, the taxable supply is the rental income from immovable property (other than residential), and the exempt supply is the interest earned by way of deposits, loans, or advances. In turn, it will determine the threshold limit to obtain registration under the GST Act. 

Once the GST registration is obtained, GST must be paid on the taxable supplies which are explicitly not exempt under the act, irrespective of its value. The ruling could impact those who do not earn business income since they also might be forced to seek GST registration, including homemakers, retired persons, and freelancers. 

There are two arms to reckon the levy of GST, i.e. supplies made for consideration and in the course of carrying out a business.

Also Read: New GST Registrations Get Delayed Due to Lockdown

The CGST Act defined the term ‘aggregate turnover’ as a cumulative value of the following:

  • All taxable supplies
  • All exempt supplies
  • Exports of goods and services or both
  • Inter-state supplies

But it would exclude the following from the items listed above:

  • Inward supplies taxed on a reverse charge basis
  • Tax portion, such as CGST, SGST/UTGST, IGST, and the Cess

All GSTINs registered under a particular PAN must be considered for computing aggregate turnover to check for the requirement of GST registration. The ‘exempt supplies’ cover goods/services charged with nil GST rate; and non-GST supplies, such as alcohol and petrol, and supplies that are specifically and wholly exempted under the GST Act. 

Interest income by way of giving out deposits, loans, and advances are specifically exempt income, and hence no GST needs to be paid on this portion of income. Yet, it forms part of the aggregate turnover to obtain GST registration.

Accordingly, if such total income (taxable plus exempt) exceeds the threshold limit of Rs 20 lakh (Rs 10 lakh for special category states), GST registration needs to be obtained and GST must be paid on the portion of taxable supplies.

While the advance rulings apply to only those who seek it, these highlight important takeaways and interpretations of the law for other individuals and taxpayers facing similar problems and also guide the tax professionals in advising their clients.

It is noteworthy to mention that earlier CBIC had issued a ‘removal of difficulty’ order for composition scheme under Section 10 of the CGST Act on the same subject. As per the ROD order no. 1/2019 dated 1st February 2020, interest or dividend earned by way of extending deposits, loans, or advances may not be considered for arriving at the aggregate turnover while finding out the eligibility under this scheme.

A similar clarification from the CBIC on this matter, for taxpayers not opting for composition scheme, should put the record straight.

For any clarifications/feedback on the topic, please contact the writer at

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