The West Bengal Authority of Advance Ruling (AAR) has held that the services by way of extending loans by HDFC Bank to the applicant against consideration payable in the form of interest is an inward supply of exempted services of the applicant received from a registered person and therefore would be a part for computing the threshold limit of 80%.
The bench of Tanisha Dutta and Joyjit Banik has observed that services by way of extending loans by HDFC Bank to the applicant against consideration payable in the form of interest is an inward supply of exempted services of the applicant. Such services, therefore, would be a part of total inward supply for the purpose of computing the threshold limit of 80% and since HDFC Bank is a registered person under the GST Act, the supply admittedly has been made from a registered person.
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Background
The applicant is involved in the construction business of building and selling of residential flats under affordable housing schemes. The applicant has availed finance from HDFC Bank Ltd and paying interest to the bank against monthly invoice raised by the bank.
The applicant is engaged in the construction business of building and selling residential flats under affordable housing schemes. The applicant is charging 1% GST on the buyers of flats and doesn’t avail any input tax credit.
Read More: 5% GST PAYABLE ON SUPPLY OF SECOND HAND GOLD JEWELLERY OR DIAMOND JEWELLERY AFTER MINOR PROCESSING: AAR
The applicant, being a promoter, is required to procure all capital goods and at least 80% of inputs and inputs services from registered suppliers. If not so procured, tax is payable by the applicant under reverse charge on the balance amount.
Issue Raised
The applicant sought the advance ruling on the issue whether interest charges by HDFC Bank Ltd should be treated as inward supply from registered suppliers for calculating a threshold of 80% since HDFC Bank Ltd is a registered company.
Conclusion
The AAR ruled that for the purpose of determining 80% of inward supplies and services which are to be received from a registered person, the promoter has to determine the value of total inward supplies of goods and services. And to determine the total value of inward supplies, the promoter shall exclude services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI) and value of electricity, high speed diesel, motor spirit, natural gas. However, the total value of supply shall include inward supplies of exempted goods / services and the promoter shall compute the threshold of 80% of inward supplies accordingly.
whether interest charges by Bank should be treated as inward supply?
The services by way of extending loans by Bank to the assessee against consideration payable in the form of interest is an inward supply of exempted services of the applicant received from a registered person and therefore would be a part for computing the threshold limit of 80%.
Applicant’s Name: Mangalam Developers
Date: 10/09/2024
