FD Interest in GST

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This discussion clarifies the Goods and Services Tax (GST) implications of Fixed Deposit (FD) interest. It confirms that FD interest is not included when calculating aggregate turnover for GST registration or audit purposes. Furthermore, it explains that while extending deposits is an exempt supply, the interest earned from these deposits is generally not considered an exempt supply for the purpose of proportionate Input Tax Credit (ITC) reversal, unless the ITC was specifically used for making such exempt supplies.

CA. Roopali Kadam

CA. Roopali Kadam (Querist)

20 June 2022 For FD Interest

1) Is it required to be considered in the calculation of Aggregate Turnover for Registration or Audit Purpose?

2) Will it be considered as Exempt Supply for the purpose of Proportionate reversal of ITC/ITC reversal

Thank You & Regards
CA Roopali

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 June 2022 1 Not required to be considered for aggregate turnover.
2 No it will not fall under exempt supply.

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CA. Roopali Kadam

CA. Roopali Kadam (Querist)

21 June 2022 Isn't Interest on Deposits considered an exempt supply?

Udaya Chandran

Udaya Chandran (Expert)

21 June 2022 As per my opinion,

As per Notification No. 12/2017- Central Tax (Rate) dated 28/06/2017, S.No.27, services by way of extending deposits, loans or advances are exempted from GST. So, extending deposits are exempted supplies under GST.

Aggregate turnover includes exempted supplies. So while calculating aggregate turnover, exempted supplies are also included for taking registration.

If a person makes supply of any other business services and also makes deposits or extends loans or advances and the turnover exceeds the limit of Rs.20 lakhs, then he has to get registration.

If a person makes supply of goods and also makes deposits or extends loans or advances and the turnover does not exceed Rs.40 lakhs, then he is not liable to get registered. Here, aggregate turnover does not include the deposits/loans/advances. (Refer: Explanation to Section 22 of CGST Act)

If a person only makes deposits/loans/advances, then he is not liable to get registered because the person exclusively involves in exempted supplies (Refer: Section 23 (1) (a) of CGST Act).

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CA. Roopali Kadam

CA. Roopali Kadam (Querist)

21 June 2022 Thank You Udaya Sir for clarifying 1st part of the question,
What is your opinion on the 2nd part?
As it is Exempt Supply, we need to consider it for Proportionate ITC reversal or is there any exception to such Interest incomes.

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Udaya Chandran

Udaya Chandran (Expert)

21 June 2022 ITC reversal is required only when the input is used to effect exempted supplies. If you have taken ITC for extending deposits, such as ITC on bank charges related to such deposits, then ITC reversal of such inputs are necessary.

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CA. Roopali Kadam

CA. Roopali Kadam (Querist)

21 June 2022 Any other views or references