The applicant is unregistered person and has field an application for advance ruling under section 97 of the CGST Actr 2017 read with Rule 104 of CGST Rules 2017 and section 97 of KGST Act,2017 read with rule 104 of KGST Rules 2017.
The applicant is an unregistered person and in receipt of various types of inconnes/revenues mentioned as under:
1. Partner’s salary as partner from his partnership firm
2. Salary as director from private limited company
3. Interest income on partners fixed and variable capital accounts
4. Interest received on loan given, advance given, accumulated interest along with deposit/ fixed deposit, interest on debentures, interest on post office deposits; interest on national saving certificates (NSCL interest income on PPF, accumulated interest received on closure of PF account, interest income on national pension scheme (NPS)
5. Receipt of maturity proceeds of life insurance policies
6. Dividend on shares
7. Rent on commercial property and residential rent
8. Capital gain/loss on shares
In the view of above the applicant has sought advance ruling in respect of the following questions:
i. Out of the given sources of income/revenue which all revenue income be considered for aggregate turnover for registration under GST?
ii. Out of given nature of income/revenue, when the supply even if exempted need to be considered?
At the time of personal hearing and proceedings held the authority had made the following discussions and findings:
In these regard, we invite reference to the definition of “Aggregate Turnover”, in terms of Section 2(6) of the CGST Act, 2017 which reads as under:
“aggregate turnover” means the aggregate value of a// 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 under in ter-state supplies of persons having the same permanenant account number, to be computed on all India basis but excludes central tax, state tax,. union territory tax, integrated tax and cess.
It could be seen rrom above that the aggregate turnover is sum of different supplies. Therefore any income included in aggregate turnover need to be amounts to Supply in terms of Section 7(1)(a) of CGST Act, 2017
Section 7(1)(a) of CGST Act’ 2017 stipulates any transaction must consists the following three components to get quality of ‘supply’
i. The transaction must hi valve a supply, of goods- or services Or bath, such as sale, barter, exchange, license, rental, lease or disposal made or agreed to be made.
ii. The transaction must be for a consideration by a person
iii. The transaction must be in the course of furtherance of business.
In view of the above, income received from each source has to be examined whether it is in relation to transaction that amounts to supply or not, Therefore wire consider different types of sources of income, one at a time.
a) Interest Income received from different sources: The applicant is in receipt of interest income from different sources as mentioned above. All these interest incomes are out of deposits/loan extended by the applicant. The services by way of extending deposits, loan or advances in so far as the consideration is represented by way of interest or discount are exempted under Entry No, 27(i) of the Notification Number. 12/2017 Central Tax (Rate) dated 28.05-2017. Thus these amounts nothing but exempted services and are to be included In the aggregate turnover for registration under the provisions of the GST Act.
b) Partner’s salary received as partner from applicants partnership firm: In this case two views are given by the authority the one is if the applicant is working partner and is getting salary then the said salary is neither supply of goods nor supply of service in terms of clause I of Schedule III of the CGST Act 2017, the second is if die applicant is in receipt of amount towards his share of profit from the said firm then also the said income is not in purview of GST as the “share of Profit” nothing but application of money and hence not required to he included in the aggregate turnover under the provisions of GST Act.
c) Salary Received as Director from a Private Limited Company: Two possibilities may arise with regard’s to the instant issue of amount received by the applicant, The first possibility that the applicant is the employee of the said company (Executive Director) in which case the service of the applicant as an employee to the employer are neither supply of goods nor supply of service in terms of Schedule III of CGST Act 2017, The Second possibility that the applicant is nominated director (Non Executive Director) of the company and provides the service to the said company.. In this case the remuneration paid by the company flexible to GST in the hands of company under reverse charge mechanism under Section 9(3) of the CGST Act 2017 In hands of company under Entry No. 6.of Notification No, 13/2017-Central Tax(Rate) dated 28.06.2017. Thus the value of said service of the applicant being a Non Executive Director are includable in aggregate turnover as it is the value of the taxable services supplied by the applicant, tough the tax i$ discharged by the private limited Company under reverse charge mechanism..
d) Rental Income on Commercial Property and Residential Property: The transaction of rental/lease of commercial property amounts to supply and the same is in the course of furtherance of business and hence the said transaction amounts to supply in terms of section 7(1)(a) of CGST Act 2017. Thus the value of such supply included in aggregate turnover for registration. However “services by way of renting of resdentiatal dwelling for use as residence are exempted from the tax (G5T) in terms of Entry No_ 12 of the Notification No, 12/2017 dated 28.06.2017_ Therefore income received by the applicant towards rent of residential property property is in the nature of exempted supply and to tie included in the aggregate turnover for GST registration.
e) Dividend on shares and capital Gain/ Loss on shares: The term ‘securities’ which has the same meaning assigned to it in clause 2(h) of securities contract (Regulation) Act 1956. in terms of section 2(101) of CGST Act 2017 explicitly exclude from the purview of GST by virtue of its exclusion from the definition of ‘goods’ and ‘services’ as contained in Section 2(52) and 2(102) of the Act. In instant case dividend on shares, capital gain losses on sale of shares are relevant to securities and income earned is nothing but application of money. Therefore they are riot relevant for aggregate turnover and hence not required to be added to aggregate turnover for registration. under GST.
f) Receipt of Maturity Proceed of Life Insurance Policy: The impugned Income would be received on maturity of the insurance policies i.e. on closure of the insurance contract consequent on maturity of the said policies. The insurance premium is taxable under GST being consideration for services provided by the insurance company. Therefore on completion of the said contract there would rift be any service involved between the policy holder and insurance company. Therefore the amount received on maturity cif the insurance policy are not relevant and not required to be added in the aggregate turnover for registration under the provisions of GST.
In view of the forgoing, the authority had pass the following
1. The income received towards (i) Salary/remuneration as a non executive director of a private limited company, (ii) renting of commercial property and residential property., (iii) The values of a amount extended as deposits/loans/advances out of which interest i$ being received are to be included in the aggregate turnover, for registration.
2. The income received from renting of residential property is included in the aggregate turnover„ though it is an exempted supply.