Aggregate Turnover, Goods and Services Tax - GST

[Sanjeev Agrawal]

Hello respected members. Actually my query is that whether an assessee needs to pay gst if its has been running cold storage of potatoes only till date and now it has started to provide rental service to a sister concern belonging to the assessee's family members, only because its aggregate turnover i.e. cold storage receipts and rent receipts would be exceeding the threshold limit provided in the gst provisions?

Posts / Replies

[Ganeshan Kalyani]

Sir, the aggregate turnover includes exempt supplies as well. So, for registration purpose you need to account the storage turnover of potatoes as well.

[Ganeshan Kalyani]

Sec. 2(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

[YAGAY andSUN]

The applicability of GST on rental services provided by your client largely depends on the aggregate turnover, which includes both their existing cold storage receipts and the new rental income.

1. Cold Storage Services: Under GST, cold storage services provided for agricultural produce, like potatoes, are generally exempt from tax. This means that the income your client receives for storing potatoes does not attract GST.

2. Rental Income: Now, when your client starts renting out the cold storage facility to a sister concern, it falls under the category of renting of immovable property. While GST does not apply to rental income for residential properties, it does apply to commercial property rentals. Therefore, the rental income from the sister concern will be subject to 18% GST, provided the client’s aggregate turnover exceeds the threshold limit of ₹20 Lakhs (or ₹10 Lakhs in special category states).

3. Threshold Limit for GST Registration: If the total turnover (including cold storage receipts and rental receipts) exceeds the prescribed threshold limit, your client will be required to register for GST. Once registered, they will need to charge GST on the rental income at the rate of 18%.

4. GST on Related Party Transactions: The fact that the rental income is being charged to a sister concern does not change the GST implications. Transactions between related parties are treated as a supply of service, and GST is applicable accordingly. Therefore, even though the tenant is a related party, the rental service will still attract GST, and your client will need to comply with the relevant registration and filing requirements.

Summary:

• The cold storage services for agricultural produce are exempt from GST.

• Rental income from the cold storage facility is subject to 18% GST if the client’s aggregate turnover exceeds the GST threshold limit of ₹20 Lakhs (or ₹10 Lakhs in special category states).

• Once the threshold limit is crossed, your client must register for GST and charge GST on the rental income, regardless of the fact that the rental is being provided to a sister concern.

In essence, GST will apply to the rental income if the total turnover exceeds the prescribed limit, and the client will need to ensure they meet the GST compliance requirements.

I hope this version works for you. It's written in a straightforward, business-oriented style and should help in understanding the matter clearly while remaining neutral and professional. Let me know if you'd like to make any further adjustments!