By CA. (Dr.) Gaurav Gupta
Recently in the Advance Ruling in the case of Re. Shree Sawai Manoharlal Rathi (GST AAR Gujarat), the Ld. Authority for Advance Ruling (AAR) held that Interest received in form of PPF, Interest received on Personal Loans and Advanced to family/ friends, Interest received on Saving Bank Account would be included in the aggregate turnover determining the liability of registration of a person. The decision however, has no discussion as to how such incomes are falling within the ambit of the “business” and more particularly “in the course or furtherance of business”. The relevance of the phrase ““in the course or furtherance of business” has been ignored in the decision and the entire focus was on the definition of aggregate turnover, exempt turnover and so on. In my humble opinion, the sole question to be tested in this case was whether the incomes under discussion were “in the course or furtherance of business” or not. One must understand the nature of such incomes. If not, then the following incomes on an individual (other entities does not have personal savings) shall fall within the ambit of supply and succeeding, in the ambit of aggregate turnover:
- Interest on savings
- Dividends
- Retirement annuities
- Personal guarantees given for relatives
- child support and spouse maintenance payments
The very nexus of charge of GST on business supplies is to be understood. GST is a tax on supply and not income and thus, every income shall not be exigible to GST, more particularly, if the same is not from one’s business. Business as has been defined in CGST Act, 2017 means:
(17) “business” includes––
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and;
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;
In past judgement also, the term has been understood as a organised set of activities whereby a person offers a good or services for a consideration. Some of the prominent decisions are as under:
| Citation | Decision |
| Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 (SC) | The word ‘business’ connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. |
| Mazagaon Dock Ltd. v. CIT/CEPT [1958] 34 ITR 368 (SC) | The word ‘business’ is one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense. |
| CIT v. Prabhu Dayal [1971] 82 ITR 804 (SC) | Business, as understood in the income-tax law, connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. This does not, however, mean that under no circumstances a single transaction can amount to a business transaction. |
The long definition was not per se required if every receipt (other than that of money /securities / gifts) of a person was a result of a supply. The definition is very particular of its inclusions and if one sees, the entire nucleus of the term business is an activity which is in the nature of trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. The inclusions from clause (e) to (i) is case specific and are included from the experience of government when faced with the challenge from taxing such activities. In generic sense, the first three clauses from (a) to (c) would define the term business. In the said clauses, the terms which characterise the term business are the terms – trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. The terms suggests that the person must intent to undertake such activity which is in the nature of any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. If the intent is not to undertake such activities but mere savings and as a result of his savings, if some income is received, the same cannot be characterised as an outcome of an organised act of business.
Government had earlier clarified that old gold sold by an individual cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se. Applying the same analogy, the interest earned on savings and other passive investments cannot be included in the purview of supply. Thus, in my view, the decision of considering interest incomes on PPF, saving account, family loans etc as consideration for supply is not correct and not inline with the spirit of the law.
