This June 2020 along with rise in COVID cases in India, we have seen some wierd ruling in GST AAR. GST AAR which was established to help applicant in bringing transparency with regards to tax liability in advance passed some eerie ruling such as Parathas will not be consider as Rotis and will be subject to tax @18% GST against 5% tax on Rotis or to charge GST on Goods bought, sold directly overseas which defeat the purpose of promoting export and to earn foreign exchange.
However New Ruling by AAR, Gujarat set to vex a large no of household and senior citizen as it Now increased it threshold from business capacity to individual capacity.
An individual, not engaged in any business, had filed an application for advance ruling before the Gujarat bench of AAR asking whether interest received from savings bank, PPF and loans and advances to family would be considered for the purpose of calculating threshold limit for registration under GST law.
The AAR after considering all provisions said that the applicant is required to consider the value of both taxable supply i.e. “renting of immovable property” and exempted supply of service provided by way of extending “Interest earn on deposits, loans or advances” to arrive at “aggregate turnover” to determine the threshold limit for the purpose of obtaining registration under the GST Act. Accordingly, the AAR held that interest income would be included for calculating registration threshold.
In my opinion, clearly the Authority of Advance Ruling has not distinguished between earnings made in the individual capacity and in the business capacity which is against scope of supply under section 7 of CGST Act, 2017 which clearly says that Activity should be in “furtherance of business”
This ruling will not only increase unnecessary compliance to individual and senior citizens depending solely on Interest income and Rental Income but will unnecessary add cost of Rental Income as Tenant has to pay 18% GST along with rent which will make their property less attractive.
Many professionals are set to appeal against AAR ruling however government should change the law and should specifically exclude interest earned in Individual capacity.