Significant Points While Calculating Aggregate Turnover under GST

Published At: 22-Jul-2020

Significant points while calculating Aggregate Turnover under GST

The amount of Aggregate Turnover is an important criterion for determining the applicability of many provisions of  GST law relating to  Registration, Filing of Returns, Audit, etc. The term aggregate turnover comprises of taxable supplies, exempted supplies,  nil rated supplies, non-taxable supplies  etc  and hence  it is important to calculate Aggregate Turnover accurately.


APMH has published a detailed blog on - Analysis of Non-taxable Supply, No Supply, Exempted Supply, Nil-Rated Supply and Zero-Rated Supply under GST Part II wherein it was explained that whether certain category of income would be included while calculating “Aggregate Turnover” as per the Central Goods and Services Tax Act, 2017 (herein after referred to as “CGST Act”).

Recently the Authority of Advance Ruling, Karnataka (herein after referred to as “the AAR”) have given a ruling in the case of Anil Kumar Agarwal (herein after referred to as “the Applicant) on 04th May, 2020 wherein it was determined whether certain income would form part of Aggregate Turnover or not.

It was noted by the AAR that the Applicant had income/revenue from various different sources which included the following:

1. Partner’s Salary received as partner from Partnership Firm

2Salary received as director from a Private Limited Company

3. Rental Income on Commercial Property

4. Rental Income on Residential Property

5. Interest Income from partner’s capital, loan given, advance given, fixed deposit, debentures, post office deposit, National Savings Certificate, PF account, PPF account, National Pension Scheme.           

6. Accumulated Interest (along with principal) received on closure of PF Account

7. Receipt of maturity proceeds of life insurance policies

8Dividend on Shares

9. Capital Gain/Loss on sale of Securities

Analysis of the AAR

The AAR first referenced the definition of Aggregate Turnover as per Section 2(6) of the CGST Act. The same is as follows:

“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.

The AAR then noted that any income to be included in the aggregate turnover need to be a transaction which is a “Supply” as per Section 7(1)(a) of CGST Act. A transaction must contain the following three components to qualify as a Supply:

1.       The transaction must involve a supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, disposal made, or agreed to be made

2.       The transaction must be for a consideration

3.       The transaction must be in the course or furtherance of business.

Considering all the above, each of the type of income is analyzed to ascertain their inclusion in Aggregate Turnover:


Salary received as Director from Private Limited Company

* If a director is an Executive Director of the company, then the relation between the Director and Company is of an employee-employer and the services of the director as an employee would be neither treated as supply of goods nor as supply of service as per Schedule III of CGST Act.Therefore the amount received by the Director as an employee would not be included in calculation of Aggregate Turnover.


*  If a director is a Non-Executive Director of the Company then the service provided by the Director is a Supply under GST. The GST liability will have to be paid by the Company under Reverse Charge Mechanism as per Section 9(3) of CGST Act read with entry no. 6 of Notification no. 13/2017-CT(R) dtd 28/06/2017. 

The amount received by a director in his capacity as a non-executive director is to be included by him while calculating the Aggregate Turnover.


Amount received as partner from Partnership Firm

The income can be categorized as follows:

1.       If a person is a working partner and getting salary, then the said same is neither Supply of Goods nor Supply of Services in terms of Clause 1 of Schedule III of CGST Act.

2.       If a person is in receipt of an amount towards his share of profit from the partnership firm, then the same is nothing but an application of money.

Therefore in both of the aforementioned cases, the transaction is not a Supply as per CGST Act and hence will not be included in calculation of Aggregate Turnover.


APMH Comment

* To understand the above ruling made by the AAR we have to first understand the meaning of “Application of Money

“Money” has been excluded from the definition of “Goods” as well as “Services” as per Section 2(52) and 2(102) of CGST Act. Therefore a transaction in money is not a transaction in any Goods or Services and thus is not a Supply under GST.

The payment made towards Share of Profit by Partnership Firm to Partner is a transaction or application in money and therefore not considered as a Supply under the CGST Act.


Rental Income on Commercial Property

As per Clause 2(b) of Schedule II of CGST Act, renting of Commercial Property is to be treated as a Supply of Service. Thus if a commercial property is rented out for a consideration in the course or furtherance of business, the said transaction is a Taxable Supply of Service as per CGST Act.

Therefore the value of such supply is to be included in the calculation of Aggregate Turnover


Rental Income on Residential Property

As earlier established Renting of Property is a Supply as per CGST Act. However service of renting of Residential Property for use as residence is exempted from tax under Entry No.12 of Notification No. 12/2017- CT(R) dtd 28/06/2017.

Thus renting of residential property is a Supply under GST, however the same is exempted from tax if it is rented out to be used as a residence.

As per the definition of Aggregate Turnover, Exempt Supply is to be included while calculating the same. Hence rental income on Residential Property will be included in calculation of Aggregate Turnover.


Interest Income from various sources

The activity of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount is considered as supply of services and is exempted under Entry 27(a) of Notification No. 12/2017- CT(R) dated 28/06/2017.

Thus the interest earned out of the loans, deposits or advances is the consideration which is exempted via the aforementioned Notification entry.

The AAR Ruling has held that the  activity of extending the loans/deposits/advances is an exempted service and the actual amounts of the loans/deposits/advances becomes the value of service and accordingly, the activity is an Exempted Supply and is to be included while calculating Aggregate Turnover, which seems to be incorrect.


APMH Comment

In our view, the activity of extending of loan/deposit/advances is an application of money not a supply. The interest amount received by the applicant would be the value of exempted service.


Therefore the interest amount would have to be included in the calculation of Aggregate Turnover and not the amounts of the loans/deposits/advances.

Maturity Proceeds of Life Insurance Policies

The AAR Ruling observed that in a Life Insurance agreement the Insurance Company is the service supplier and the policy holder is the service recipient. The consideration of the aforesaid service is in the form of Insurance Premium on which GST is charged by the Insurance Company.

On completion of the agreement there is no further service provided between the policy holder and the insurance company. Therefore the maturity proceeds of Life Insurance is not against any supply and thus not to be included while calculating Aggregate Turnover.


Dividend and Capital Gain/Loss on Securities

While adjudicating the issue of inclusion of transaction in security and receipt of dividend the AAR made the following analysis

* Securities have been excluded from the definition of “goods” and “services” as per Section 2(52) and 2(102) of CGST Act

* Therefore the transactions in such Securities by any person will not amount to Supply as per CGST Act and therefore the amount is not to be included while calculating Aggregate Turnover

* The income earned in relation to such transactions; i.e. payment of dividend, capital gain/loss; is nothing but application of money and therefore not a supply and is also not included


The above points are summarized below for easy reference:

Nature of income/receipt

Inclusion in Aggregate Turnover as per the AAR

Inclusion in Aggregate Turnover as per APMH

Amount received by Executive Director

Not Included

Not Included

Amount received by Non-Executive Director



Salary received by Partner from Partnership firm

Not Included

Not Included

Share of Profit received by Partner from Partnership Firm

Not Included

Not Included

Rental Income on Commercial Property



Rental Income on Residential Property



Extending the loans/deposits/advances


Not Included

Interest income

Not included


Maturity Proceeds of Life Insurance

Not included

Not included

Dividend on Shares

Not included

Not included

Capital Gain/Loss on Share of Shares

Not included

Not included



The AAR has resolved many concerns regarding inclusion of certain category of income in the definition of aggregate turnover. However the holding of the activity of extending loans/advances as the value of supply to be considered for the purposes of calculating aggregate turnover, is incorrect. The interest earned on extending such deposits should only be considered while calculating Aggregate Turnover.

Prepared by 

CA Sohail Kagalwala

Senior Associate

GST Enterprise Audit

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