ACCOUNTING & TAXIATION
Turnover Meaning under GST Audit
Every business entity engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed Rs 40 Lakhs in a financial year is required to be registered under the GST Act. For supply of services, aggregate turnover of Rs 20 Lakhs (10 Lakhs in special category States) is the limit for registration.
The GST Council increased the threshold limits for GST registration w.e.f 01 April 2019. The limit has been increased for exclusive supply of goods only. The states have an option to opt for a higher limit of Rs 40 Lakhs or continue with the existing limits of Rs 20 Lakhs (10 Lakh for special category States)
Normal Category States who opted for a new limit of Rs.40 lakh are Chhattisgarh, Jharkhand, Delhi, Bihar, Maharashtra, Andhra Pradesh, Gujarat, Haryana, Goa, Punjab, Uttar Pradesh, Himachal Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu, West Bengal.
Assam & J&K have also opted to raise the limit to Rs.40 lakh.
Kerala and Telangana who are normal category states choose to maintain status quo (maintains existing limit 0f Rs 20 Lakhs)
Puducherry, Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh, Uttarakhand are the special Category States who opted for new limit of Rs.20 lakh.
As per section 2 (6) of the Act for Aggregate Turnover- “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.
What is Audit under Goods and Service Tax (GST)?
Under section 2(13) of the CGST Act, an audit has been defined as an examination of records, returns and other relevant documents furnished or maintained by the person registered under the GST Acts or under any other law for the time being in force. GST audit is conducted to verify the correctness of taxes paid, turnover declared, input tax credit (ITC) availed and a refund claimed, and to assess the compliance of the registered person with the provisions of the Acts and the rules made there under.
Every person registered under GST Act, whose aggregate turnover exceeds the prescribed limit (i.e. 5 crore rupees) during the financial year, is required to get his books of accounts audited by a (CA) Chartered Accountant or a (CMA) Cost and Management Accountant. The person registered under GST who is required to get his books of accounts audited under GST Act shall submit the Annual Return electronically along with a reconciliation statement, reconciling the declared value of supplies in the GST return furnished for the financial year and a copy of the audited statement of accounts.
Both the reconciliation statement and the copy of audited annual accounts, duly certified, is to be furnished by the registered person in Form GSTR-9C along with the annual return.
For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 has been waived off.
For the purpose of GST Audit, the term Aggregate Turnover means “All India PAN-BASED turnover for a particular financial year”.
Thus, if a taxable entity having multiple GSTIN has aggregate turnover as per its Annual Financial Statement, separate reconciliation statement and Audit Report is required from each branch/division/factory even if aggregate turnover of such branch/division/factory is less than Rs. 5 crores per annum.”.
The person registered under the GST Act, for facilitating the GST audit, shall keep and maintain his accounts to show the correct value in regards to:
- Outward supply of goods or services or both
- Stock of goods
- Production or manufacture of goods
- Inward supply of goods or services or both
- Books of accounts point can be added
- Input tax credit availed
- Output tax payable and paid
What is Aggregate Turnover in GST?
The “aggregate turnover” is the aggregate value of all taxable supplies, exports of goods or/and services or both, exempt supplies and interstate supplies of persons having the same PAN, to be computed on all India basis. However, such taxable supplies do not include the value of inward supplies on which GST is being paid under reverse charge basis. The aggregate turnover also excludes Central tax, State tax, Union territory tax, Integrated tax and cess.
In other words, the total of the following shall be considered as an aggregate turnover:
- Value of all taxable supplies of goods and services
- Value of all Inter-state supplies
- Value of all exempt supplies of goods and services
- Value of all export of goods or services or both
Turnover would, therefore, include the following:
- All taxable supplies other than supplies on which reverse charge is applicable.
- Supplies between distinct entities (in different States or separate business vertical).
- Goods supplied to job worker on principal to principal basis.
- Export or zero-rated supplies.
- Goods received from job worker on principal to principal basis.
- Supplies of agents/ job worker on behalf of the principal.
- Exempt supplies under GST: exempt via any notification, non-taxable supplies (like Diesel, Petrol, Liquor etc.)
- Taxes other than those under GST
However, the following items would be excluded from Turnover:
- Inward supplies on which taxes are paid under reverse charge
- Taxes and cesses under Goods and Service Tax
- Goods supplied for or received back u/s 143 (job work)
- Interstate supply of services
- Transactions which are neither supply of goods or service.
- Supplies provided outside India or received outside India
As per section 2(47) exempt supply means any supply of goods or/and services or both which may be wholly exemption from tax under section 6 or under section 11 of the IGST Act or attract nil rate of tax, and includes non-taxable supply.
How to calculate Aggregate Turnover under GST
Aggregate Turnover will be calculated as follows: –
Value of all (taxable supplies+ exempted supplies +Nil Rated supplies + Zero rated supplies +Non-GST supplies) – (Taxes & Cess under GST Act + inwards supplies +supplies under reverse charge) of a person having the same PAN (Permanent Account Number) across all his business entities in India.
Difference between Aggregate Turnover and Turnover in a State:
The aggregate turnover is different from turnover in a State. The former is used for determining the threshold limit for GST registration as well as eligibility for Composition Scheme. However, the composition levy would be calculated on the basis of turnover in the State.
GST Audit Threshold and Rectifications
If the turnover of the registered person exceeds the prescribed limit i.e. rupees 5 crores in a financial year, then the registered person shall get his accounts audited by a (CA) Chartered Accountant or a (CMA) Cost & Management Accountant as per GST Rules.
The annual return is required to be filed electronically through Form GSTR 9C, along with the audited statement of annual accounts, the reconciliation statement and other documents as prescribed as per the GST law.
For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 has been waived off.
If any mistake/error is noticed in any filled returns during the financial year while auditing the books of accounts, the same can be rectified only in the annual return.