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February 23, 2023
By
Prudhvi Raj

GST on Interest Income of Individual inclusion in aggregate turnover

India introduced the Goods and Services Tax (GST) on July 1, 2017, as a single, unified tax system for goods and services, replacing a complex and multi-layered indirect tax structure. The GST is levied on the value-added to goods and services at each stage of production and distribution, with a credit of tax paid at the previous stage available as an input tax credit. The GST is applicable to all businesses registered under the GST regime, including small and medium businesses and startup founders.

One of the areas where there has been confusion around the GST is the treatment of interest income of individuals and its inclusion in the aggregate turnover. In this article, we will explore the intricacies of GST on interest income of individual and its inclusion in the aggregate turnover.

What is Interest Income?

Interest income is the amount earned by an individual on their savings or investments, such as fixed deposits, savings accounts, recurring deposits, etc. It is a form of passive income that is earned without any effort on the part of the individual. Interest income is taxable as per the provisions of the Income Tax Act, 1961, and is added to the individual's total income for the purpose of taxation.

Is Interest Income subject to GST?

Interest income is not subject to GST as it is a form of income and not a good or service. The GST is levied on the supply of goods and services and not on income earned by an individual. However, there has been confusion around the inclusion of interest income in the aggregate turnover for the purpose of GST registration.

What is Aggregate Turnover?

Aggregate turnover is the total value of all taxable supplies (goods and services) made by a registered person, both taxable and exempt, in a financial year. It includes turnover of all business verticals located in the same state, but excludes GST paid on inward supplies, sales of capital assets, and supplies made by a person as an agent on behalf of another person. Aggregate turnover is a crucial factor in determining the liability to register under the GST regime.

Is Interest Income included in Aggregate Turnover?

According to the GST Act, interest income earned by an individual is not included in the aggregate turnover for the purpose of GST registration. This means that if an individual has only interest income and no other taxable supplies, they are not required to register under the GST regime.

However, if an individual has other taxable supplies, such as rental income, commission income, etc., and the aggregate turnover exceeds the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states), they are required to register under the GST regime and pay GST on the taxable supplies. In this case, the interest income earned by the individual is also included in the aggregate turnover for the purpose of calculating the turnover limit.

Conclusion

In conclusion, interest income earned by an individual is not subject to GST as it is a form of income and not a good or service. It is not included in the aggregate turnover for the purpose of GST registration if the individual has only interest income and no other taxable supplies. However, if the individual has other taxable supplies and the aggregate turnover exceeds the threshold limit, they are required to register under the GST regime and pay GST on the taxable supplies, including the interest income earned.

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