The primary question posed by the Applicant pertained to the includability of interest charges against finance scheme as an inward supply

The West Bengal Authority for Advance Ruling ( AAR ) recently ruled that Interest Charges levied by a financing bank against loan availed by the Applicant can be treated as an ‘Inward Supply’ while computing the 80% threshold limit for supplies to be received from registered suppliers. The Application was filed by Mangalam Developers, an entity involved in the construction and selling of buildings and residential flats under affordable housing schemes while charging Goods and Services Tax (GST) at 1% from the buyers of the flats while not availing any input tax credit. Transform Your GST Knowledge: Comprehensive Course – Enroll Now The Applicant sought answers under Section 97(2)(b) and 97(2)(e) of the GST Acts and raised the following question before the AAR: Whether interest charges by HDFC Bank Ltd should be treated as inward supply from registered suppliers for calculating threshold of 80% since HDFC Bank Ltd is a registered company. Mangalam Developers, being a promoter charging GST only @ 1%, are required to procure all capital goods and at least 80% of the inputs and input services used by them in the course of business from registered suppliers. If the promoter fails to attain the threshold limit, then the balance amount may be payable by them in the form of tax under reverse charge mechanism. The two-member Bench of AAR comprising Dr Tanisha Dutta, Joint Commissioner, CGST & CX Joyjit Banik, Additional Commissioner, SGST considering the submissions on record observed that total value of inward supplies eligible to be included as ‘inward supplies’ have been clarified via FAQs (Part II) on real estate issued by the Tax Research Unit, Department of Revenue, ministry of Finance on 14.05.2019: “….the promoter is to 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.” AAR further observed that services by way of provision of loans by HDFC Bank in lieu of interest paid by the Applicant is an inward supply of exempted service as per serial number 27 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Transform Your GST Knowledge: Comprehensive Course – Enroll Now AAR ruled that HDFC Bank, being a registered entity under the GST Acts is eligible to provide loans to the Applicant and the consideration paid by the Applicant in the form of interest accrued on the loan amount is eligible for the inclusion of inward supply of exempted services to compute the threshold limit of 80%.