Seeking your expert view on GST return disclosure of FD interest income

Detailed Legal Reasoning

(A) Who is the supplier of service?

• Under Entry 27(a) of Notif. 12/2017, the service is “extending deposits”.

• The bank extends a financial service to the depositor by accepting deposits and paying interest.

• The bank is the supplier; the depositor is the recipient (Section 2(93)).

(B) Does the depositor make any “outward supply”?

• Outward supply (Section 2(83)) requires a supply made by a taxable person.

• Mere receipt of interest does not constitute supply under Section 7.

• There is no consideration flowing from depositor to bank for a service supplied by the depositor.

✔ Therefore, no outward supply exists in the hands of the depositor.

(C) Relevance of invoice & reporting mechanism

• Rule 46 mandates invoice issuance only by the supplier.

• Since the depositor is not the supplier, no invoice is issued and no transaction exists to be reported in:

  • GSTR-1 (details of outward supplies),

  • GSTR-3B (summary of outward taxable/exempt supplies), or

  • GSTR-9 (consolidation of outward supplies).

GST returns do not capture income receipts unless they arise from outward supply.

(D) Why does Circular 12/12/2017-GST mention interest income?

The circular states:

“Interest earned on deposits shall be included in the aggregate turnover for registration purposes.”

This flows from Section 2(6), which includes:

• Exempt supplies, and

• Supplies made by a person, whether or not liable to tax.

⚠️ This deeming fiction applies only to “aggregate turnover” computation, not to return reporting.

Hence:

• Included → Only for registration threshold / composition eligibility.

• Not included → In GSTR-1 / 3B / 9, unless the person himself supplies such service.

(E) Transaction-based nature of GST returns

GST returns are designed to report:

• Supplies made (not income earned),

• Matched with invoices / liability / ITC chain.

If depositors were required to report FD interest:

• It would create non-invoice-based exempt supplies,

• With no counter-party matching,
  which is structurally inconsistent with GST design.