In re Mangalam Developers (GST AAR West Bengal)
In the case of In re Mangalam Developers (GST AAR West Bengal), the applicant sought clarity on whether interest charges by HDFC Bank Ltd should be considered as inward supply from registered suppliers when calculating the required threshold of 80% as mandated by Notification No. 03/2019-Central Tax (Rate) dated March 29, 2019. The applicant, engaged in constructing affordable residential flats, is obligated to procure a minimum of 80% of their inputs and input services from registered suppliers to benefit from the lower GST rate of 1% on the sale of these flats. Failure to meet this threshold would necessitate payment of tax at the higher rate under the reverse charge mechanism for the shortfall.
The applicant argued that interest payments made to HDFC Bank, which are classified as exempt from GST, should be included in the threshold calculation because HDFC Bank is a registered supplier. The Advance Ruling Authority noted that the services provided by HDFC Bank in the form of loans, represented by the interest charged, indeed qualify as exempted inward supplies under GST. The ruling clarified that the interest payments must be counted towards the total value of inward supplies to determine compliance with the 80% threshold. Consequently, the Authority ruled in favor of the applicant, confirming that interest charges from HDFC Bank are to be treated as inward supplies for this purpose. This decision aligns with the stipulations outlined in the relevant notifications and FAQs issued by the CBIC regarding inward supplies from registered suppliers and their impact on the calculation of GST thresholds.
