Overview- Aggregate Turnover
As per 2(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.
Inclusion in calculating Aggregate Turnover :- Taxable supply, exempt supply, Nil Rated supply , Zero rated supply , Non GST supply and supply to distinct person ,need to be included in calculation of aggregate turnover . Meaning of these supplies has been explained as follows :-
Taxable supply :– Taxable supply has been broadly defined and means any supply of goods or services or both which, is leviable to tax under the Act.( Sec 2(108) of CGST Act)
Exempt Supply :- As per section 2(47) of the CGST Act, 2017 , Exempt Supply means supply of any goods or services or both which attracts nil rated of tax or which may be wholly exempt under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes Non- Taxable supply.
Advance Rulings
Case: M/s Jaimin Engineering Pvt. Ltd.
Order No.: RAJ/AAR/2018-19/07
Dated :01/07/2018
Questions sought by applicant:
Whether applicant is required to be registered????
Submission of the Applicant:
- Ms Jaimin Engineering Private Limited is engaged in construction of Cold storage. GST provisions for registration are covered in Chapter of CGST Act.
- Section 22 of CGST Act provide for the basic requirement for registration as reproduced below:
“Ever supplier shall be liable to be registered under this Act in the State or Union Territory , other than special category States, from where he makes a taxable supply of goods or services both, if his aggregate turnover in a financial year exceed twenty lakh rupees”
“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.
1. Applicant further submitted that the place from where the supply’s made will be taken as a location of supplier. In our case the supply will be made from Gujarat2)
2. Definition of Location of the supplier of services as per sec 2(71) of CGST Act 2017 as reproduced below :
(a) where supply is made from a place of business for which the registration has been obtained the location of such place of business.
(b) where a supply is made from a place other than the place of business for which registration has been obtained a fixed establishment elsewhere), the location of such fixed establishment.
(c) where a supply is made from more than one establishment, whether the place of business or fire establishment the location of the establishment most directly concerned with the provisions of the supply and
(d) in absence of such places, the location of the usual place of residence of the supplier:
Findings and Analysis:
The Works Contracts has been defined in Section 2(19) of the CGST Act, 2017 “works contract” means a contract for building construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration commissioning of any immovable property wherein transfer of proper In goods (whether as goods or in other forms) involved in the execution of such contract.”
As para 6(a) of Schedule II to the CGST Act, 2017, works contract as defined in section (119) of the CGST Act, 2017 shall be treated as a supply of services.Thus there is a clear demarcation of a work contract as a supply of services under GST Act
As per Section 2(15) of the Integrated Goods and Services Act, 2017, the term “location of the supplier of services”means:-
a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business
b) where a supply’s made from a place other than the place or business for which registration has been obtained a fired establishment where, the location of such fixed establishment.
c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment mod directly concerned with the provisions of the supply; and
d) In absence of such places the location of the place of residence of the supplier
The location of the Works Contractor shall remain to be the state where is principal place of business is registered (Unless he has established his office/established in the place where the services are supplied)
As per section 12(3)(a) Of IGST Act 2017 in case of Works Contract Services Place of supply shall be the location at which the immovable property (construction site) is located Section 22(1) of CGST Act 2017 defines the liability for registration as:
Every supplier shall be liable to be registered under this Act Stare or Union territory: other than special category States. from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial pear exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from are the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceed ten lakh rupee
In view of the foregoing rule as under:
RULING:
A supplier of service will have to register at the location from where he makes Taxable supplies or is supplying Taxable services if his aggregate turnover in a financial year exceeds twenty lakh rupees (ten lakh rupees in any of special category states).
While supplying services if the supplier of services (i.e. applicant who in the given case is a Works Contractor and is registered in State of Gujarat) has any place of business/office in the State of Rajasthan i.e. has a fixed establishment for operation in State of Rajasthan (place where the services are to be provided) then he is required to get himself registered in State of Rajasthan,
Case: M/s Anil Kumar Agrawal Order No.: KAR/ADRG/30/2020 Dated :04/05/2020
Brief facts of case:
The applicant is unregistered person and is in receipt of various types of income /revenue, mentioned as under:
a) Partner’s salary as partner from my partnership firm,
b) Salary as director from Private Limited company,
c) Interest income on partners fixed capital credited to partners’ capital account,
d) interest income on partners variable capital debited to partners’ capital account
e) Interest received on loan given,
f) Interest received on advance given
g) Interest accumulated along with deposit/ fixed deposit
h) Interest received on debentures
i) Interest income credited on PF account
j) Accumulated Interest (along with principal) received on closure of PF account.
k) Interest income on PPF
l) Interest income on National Pension Scheme (NPS)
m) Receipt of maturity proceeds of life insurance policies
n) Dividend on shares
o) Rent on Commercial Property
p) Residential Rent
q) Capital gain/loss on sale of shares
Questions sought by applicant:
In view of the above the applicant has sought advance ruling in respect of the following questions:
1. Out of the given sources of income Revenue which all revenue income shall be considered for Aggregate Turnover for registration?
2. Out of given nature of income / revenues, when the supply even if exempted, need to be considered?
Submission of the Applicant:
The applicant furnishes his understanding interpretation of law issue point in which is as under:
i) The Income received towards partner’s salary, as a partner, from the partnership firm and also the income received towards salary as Director from a Private Limited company are not includable in the Aggregate Turnover for the reason that any type of salary is not in the purview of GST as the same needs to be treated neither a supply of goods nor supply of services.
ii) The income received towards rent on commercial property is includes in the Aggregate Turnover as renting of immovable commercial property is a taxable service and whenever rent falls due,on the basis of rental agreement, either monthly or quarterly, the Supply of service is deemed to have been done.
iii) The income received towards residential rent is includable in the Aggregate Turnover, for registration, though the renting of residential property is an exempted service
Findings and Analysis:
It could be seen from above that the aggregate turnover is sum of different supplies. Therefore, any income to be included in the aggregate turnover need to be related to any transaction that amounts to supply in terms of Section 7(1) of the CGST Act 2017
Section 7(1) of the CGST Act 2017, stipulates that any transaction must consist the following three components to get qualify as “Supply”
- The transaction must involve of goods or services or both such as sale, transfer, barter, exchange, licence, rental lease or disposal made or agreed to be made
- The transaction must be for a consideration by a person
- The transaction must be in the course or furtherance of business.
In view of the above, income received from each source has to be examined as to whether it is in relation to any transaction that amounts to supply or not. Therefore, we consider different types of sources of income, one at a time.
1) Interest income received from different sources: The applicant is in receipt of interest income from different sources as mentioned in brief cases. All these interest incomes are out of the deposits / loans extended by the applicant the services by way of 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. Thus, the interest earned by the applicant, out of the deposits/loans/advances extended, amounts to consideration and is exempted by virtue of entry number mentioned supra. Thus, these amounts are to be included in the aggregate turnover for registration, under the provisions of GST Act.
2) Partner’s salary, received as partner, from applicant’s partnership firm: The applicant is in receipt of certain amount termed as partner’s salary from the firm where the applicant is also a partner. The applicant has not furnished any documents relevant to the issue, such as copy of agreement, appointment order etc, so as to decide whether the applicant is an employee of the partnership firm or not. In case if the applicant is a working partner and is getting salary then the salary is neither supply of goods nor supply of service in terms of clause I of Schedule II of CGST Act 2017. Further, in case if the applicant is in receipt of the amount towards his share of profit for the and partnership firm, then also the said income is not under the purview of GST as the share of profit is nothing but application of money and hence the said salary is not required to be included in the aggregate turnover for registration under the provisions of GST Act,
3) Salary received as Director from a Private Limited Company: The applicant is in receipt of certain amount termed as salary as Director of a private limited company. Two possibilities are with regard to the instant issue of amount received by the applicant The first possibility that the applicant is the capsule of the said company (Executive Director), in which case the services of the applicant as an employee to the employer are neither treated as supply of goods nor as supply of services in terms of Schedule III of CGST Act 2017
4) The second possibility that the applicant is the nominated director (Non-Executive Director) of the company and provides the services to the said company. In this case the remuneration paid by the company is exgible to GST in the hands of the company under reverse charge mechanism under section 9(3) of the CGST Act 2017 in the hand company, under entry no 6 of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017
In the instant case the applicant has not furnished any documentary evidence such as copy of agreement between the applicant and the said private company, copy of appointment order, details of ESI, PF deductions etc., so as to decide whether the applicant is in receipt of salary as an employee or as an independent director. Thus, in the absence of any documentary evidence, it is not possible to decide whether the amount received by the applicant is towards his services as an Executive Director or a Non-Executive Director.
In view of the above, the remuneration received by the applicant as Executive Director is not includes in the aggregate turnover, as it is the value of the services supplied by the applicant being an employee. Further it the applicant receives the remuneration Non-Executive Director such remuneration is able to tax under reverse charge mechanism under section 3) of the CGST Act 2017, in the hinds of the company, under entry no. 6 of Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017 .Thus, the value of the services of the applicant be Non-Executive Director are includes in the aggregate turnover, as it is the value of the taxable services supplied by the applicant, through the tax is discharged by the private limited company, under reverse charge mechanism
5) Rental income on Commercial Property: The transaction of rental/lease of commercial property amount to supply; applicant receives periodical income towards the impugned supply of the same is in the course or furtherance of business and hence the said transaction Amounts to supply in terms of Section 7(1)(a) the CGST Act 2017 .Thus, it is taxable supply of service having SAC 997212 and therefore the value of such supply is to be included in the aggregate turnover, for registration.
6) Rental income on Residential Property: The transaction of rental/lease of residential property amount to supply; applicant receives periodical income towards the impugned supply of the time is in the course or furtherance of business and hence the said transaction amounts to supply in terms of Section 7(1)(a) of the CGST Act 2017.
Aggregate Turnover includes the value of the exempt supplies also. Therefore, the income received by the applicant towards rent of residential property is to be included in the aggregate turnover.
In view of the foregoing,
RULING
1) The income received towards (i) salary/remuneration as a Non-Executive Director of private limited company, (ii) renting of commercial property and (ii) renting of residential property and (iv) the values of amounts extended as deposits/loans/advances out of which interest in being received are to be included in the aggregate turnover, for registration
2) The income received from renting of residential property is to be included in the aggregate turnover, though it is an exempted supply.
As per author “Litigation point comes due to inclusion of Non- taxable supply in the definition of Exempt supply. As per sec 2(78) “Non-taxable Supply means a supply of goods or services or both which is not leviable to tax under this GST Act”
Hence, As per section 7 of GST Act “Scope of Supply”
Any activities or transactions made or agreed to be made shall not considered as supply of goods or services or both, which are specified in Schedule III of respective section.
So, all Non- taxable supply on which tax is not leviable means No supply of goods or services or both under schedule III is also covered under the definition of non-taxable supply.
As per 2(47) “Exempt Supply” means supply of any goods or services or both which attracts nil rated of tax or which may be wholly exempt under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes Non- Taxable supply.
So, there is litigation point comes because as States AAR shall not considered Schedule III activities and transaction under definition of Exempt Supply, But as per Act its included in the definition of exempt supply and the same shall be considered while calculating “Aggregate Turnover” under GST Act.
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