GST Turnover: A ticklish sound in GST Regime | Incorporating Practical Case Studies

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  • Last Updated on 1 December, 2021

Table of Contents:
1. Introduction
2. Turnover under GST (For FYs 2017-18, 2018-19, 2019-20)
3. Illustrative List: Income in Financial Statement vs Aggregate Turnover in GST
4. Practical Issues

GST Annual Return

Check out Taxmann's Latest GST Annual Return & Reconciliation | It covers comprehensive analysis in the form of Case Studies, Advanced FAQs, Step-by-Step Guides etc., on Forms 9, 9A & 9C, along with issues relating to Anti-profiteering & policy mismatch in GST & Accounting Standards.

1. Introduction

It may be noted that vide NOTIFICATION NO. 31/2021 – CENTRAL TAX, registered person having aggregate turnover up to Rs. 2 Cr. in FY 2020-21 is exempted from furnishing annual return for FY 2020-21 and registered person having aggregate turnover upto Rs. 5 Cr. is exempted from furnishing reconciliation statement. Both of the requirements are depending upon the quantum of aggregate turnover for FY 2020-21.

Further, GSTR-9C requires the reconciliation between turnover as per audited financial statements and turnover as declared in annual return (GSTR 9).

In the GST regime, we can observe a number of terminologies pertaining to turnover being referred at different places. We have analysed all these terminologies in this chapter so that readers can clearly imagine the scope and implications of every wording along with the use of the same.

Basis Aggregate Turnover Turnover

in State or

Turnover in Union territory

Adjusted Total

Turnover

Annual

Turnover

Turnover Total Turnover
Source of definition Section 2(6) Section 2(112) Rule

89(4)(E)

It is not defined It is not defined It is not defined
Definition See Note 1 below See Note 2 below See Note 3 below
Usage of terminology Section 22(1)

(a)    For examining the applicability of registration

(b)    For examining the applicability of annual return and reconciliation.

Section 10(1)

It requires the person under composition scheme

to pay the tax with prescribed % on turnover in state.

Rule

89(4)(E) It is one of the variables of computation of refund to be claimed.

See Note 4 below Section 35(5): Audit under GST. Now omitted

w.e.f. 1-82021 (For detail see separate topic given below headed as ‘Turnover was the mystery under

GST’)

(1)               Earlier Rule 80(1)

(2)               Table 5N of Form GSTR-9,

(3)               Rules 42 and

43 of CGST Rules

(4) Exemption granted in case of services provided by incubate up to Rs. 50 lakhs in FY subject to conditions as per N/N 12/2017-CT(R).

                                                                     

Remark Different terminologies giving similar sound require the good attention. Here we have tried to consolidate all the relevant terminologies to let the readers understand in order to reach at the decision.

Note 1: “aggregate turnover” [Sec 2(6)] 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 GST and cess.

Note 2: “turnover in State” or “turnover in Union territory” [Sec 2(112)]

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 made within a State or Union territory by a taxable person,
    • exports of goods or services or both, and
    • inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person excludes GST and cess.

Note 3: Adjusted Total Turnover [Rule 89(4)(E)]

Means the sum total of the value of—

    • The turnover in a State or a Union territory,  as defined  u/s 2(112), excluding the turnover of services; and
    • The turnover of zero-rated supply of services determined in terms of Rule 89(4)(D) and non-zero-rated supply of services, excluding
    1. The value of exempt supplies other than zero-rated supplies; and
    2. The turnover of supplies in respect of which refund is claimed u/r 89(4A)* or (4B)** or both, if any, during the relevant period. Relevant period  means the period for which the claim has been filed.

*Rule 89(4A) In the case of supplies received on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 48/2017-Central Tax dated, 18th October, 2017 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide number G.S.R. 1305(E), dated the 18th October, 2017, refund of input tax credit, availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, shall be granted.

**Rule 89(4B): In the case of supplies received on which the supplier has availed the benefit of the refund of input tax credit, availed in respect of inputs received under the prescribed notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.

Note 4: Annual Turnover: An undefined terminology: Earlier Notification No. 12/2017-CT, dated 28-6-2017 (Read point (b) given below) provided the HSN requirement on invoice based on the annual turnover. Also, there is a requirement to declare HSN wise annual turnover in table 12 of GSTR 1 (Read Instructions 16 and 17 of GSTR 1 in point (a) below). Kindly note that the term ‘annual turnover’ was not defined. Then Notification No. 12/2017-CT got amended vide N/N 78/2020-CT, dated 15-10-2020, w.e.f. 1 April, 2021 (Read point (c) given below) which requires HSN requirement on invoice based on the aggregate turnover.

Readers may note that even after removing the anomaly vide N/N 78/2020-CT, dated 15-10-2020 by using the aggregate turnover as a criteria for the purpose of determination of applicable number of digits of HSN code in tax invoice, law makers have not aligned the table 12 of GSTR-1. It is suggested to correct the Instruction Nos. 16 and 17 of Form GSTR-1.

    • Instruction No. 16 of GSTR-1: Summary of supplies effected against a particular HSN code to be reported only in summary table. It will be optional for taxpayers having annual turnover upto Rs. 1.50 Cr. but they need to provide information about description of goods. (The term ‘Annual Turnover’ changed with ‘Aggregate Turnover’ but in the instruction it is still unchanged).
    • Instruction No. 17 of GSTR-1: It will be mandatory to report HSN code at two digits level for taxpayers having annual turnover in the preceding year above Rs. 1.50 Cr. but upto Rs. 5.00 Cr. and at four digits level for taxpayers having annual turnover above Rs. 5.00 Cr. (The term Annual Turnover changed with ‘Aggregate Turnover’ but in the instruction it is still unchanged).
    • Number of HSN Digits required based on the annual turnover vide Notification               12-2017-CT,        dated     28-6-2017           (HSN     requirement).     This       notification       was        applicable till 31-3-2020.

In pursuance of the first proviso to rule 46 of the CGST Rules, 2017, it is notified
that a registered person having annual turnover in the preceding financial year as
specified in column (2) of the Table below shall mention the digits of Harmonised
System of Nomenclature (HSN) Codes, as specified in the corresponding entry in
column (3) of the said Table, in a tax invoice issued by him under the said rules.

Serial

Number

Annual Turnover in the preceding  Financial Year Number of Digits of HSN Code
(1) (2) (3)
1. Upto INR 1.5 Cr. Nil
2. more than INR 1.5 Cr. and Upto INR 5 Cr. 2
3. more than INR 5 Cr. 4
    • After amendment made vide N/N 78/2020-CT, dated 15-10-2020, w.e.f. 1 April, 2021, HSN requirement on the tax invoice was made applicable based on the aggregate turnover.

In pursuance of the first proviso to rule 46 of the CGST Rules, 2017, it is notified
that a registered person having annual turnover in the preceding financial year as
specified in column (2) of the Table below shall mention the digits of Harmonised
System of Nomenclature (HSN) Codes, as specified in the corresponding entry in
column (3) of the said Table, in a tax invoice issued by him under the said rules.

Serial

Number

Aggregate Turnover in the preceding

Financial Year

Number of Digits of HSN Code
(1) (2) (3)
1. upto Rs. 5 Cr. 4
2. more than Rs. 5 Cr. 6

2. Turnover under GST  (For FYs 2017-18, 2018-19, 2019-20)

Source of  Provision Provision Comment
Section 35(5) omitted w.e.f. 1-8-2021 Every registered person whose turnover during a financial year exceeds the prescribed limit

-shall get his accounts audited by a CA or a CMA accounts and other records and

– shall submit a  u copy of the audited annual accounts,

u     the reconciliation statement u/s 44(2), and

u     such other documents in such form and manner as may be prescribed:

The term ‘Turnover’ is used in this provision while the law does not define the meaning of ‘Turnover’.
Source of  Provision Provision Comment
Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of accounts are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.
Rule 80(3) Every registered person, other than those referred to in the second proviso to section 44, an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, whose aggregate turnover during a financial year exceeds five crore rupees, shall also furnish a self-certified reconciliation statement as specified under section 44 in FORM GSTR-9C along with the annual return referred to in sub-rule (1), on or before the thirty-first day of December following the end of such financial year, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner. Aggregate turnover is defined u/s 2(6). We have further analysed the implication through practical issues given hereunder.
Press Release, Dated (Extract of para 4 only) It may be noted that furnishing of the Annual return in FORM GSTR-9 is mandatory only for taxpayers with aggregate annual turnover above Rs. 2 Cr. while reconciliation statement in FORM GSTR- 9C is to be furnished only by the registered persons having aggregate turnover above Rs. 5 Cr.

3. Illustrative List: Income in Financial Statement vs Aggregate Turnover in GST

This list will not only help to determine the aggregate turnover as per section 2(6) rather it will help the auditor for preparing the Table 5 of reconciliation statement of GSTR 9C requiring the reconciliation between turnover of audited financial statements and annual return. We have analysed various types of incomes from view point of GST law that as to whether it falls under the scope of supply or not.

Types of income Will it be part of aggregate turnover? Reason
Sale of goods Yes
Services rendered Yes
Accrued (but not received) interest, late fee or penalty for delayed payment of any consideration No Time of supply does not trigger until it is received so does not form part of the aggregate turnover [Sec. 12(6)/Sec. 13(6)]
Receipt of interest, late fee or penalty for delayed payment of any consideration Yes Sec. 12(6)/ Sec. 13(6)
Receiving Loans or deposits No Not a supply
Accrued interest or interest receivables or accumulated interest on loan/deposit/advances/ debentures/Post office deposits/ National Savings Certificates

(NSCs) but not received

Yes Exempt Supply {entry 27 of 11/2017-CT(R)}
Interest received on loan/deposit /advances/debentures/Post office deposits/National Savings Certificates (NSCs) Yes Exempt Supply {entry 27 of 11/2017-CT(R)}
Bad debts recovered No
Creditors written back No
Sale of currency or profit on sale of currency No Money is excluded from the definition of goods or services, so question does not arise to check the test of aggregate turnover
Sale of securities or profit on sale of securities No Securities are neither the goods nor the services, so question does not arise to check the test of aggregate turnover
Types of income Will it be part of aggregate turnover? Reason
Gain arising on financial assets measured at fair value through

profit or loss

No Accounting gain or loss does not meet the criteria of supply
Foreign Exchange gains on translation of assets and liabilities  as per AS-11/IND AS-21 No Accounting gain or loss does not meet the criteria of supply
Dividend Income No Not a supply
Receiving Insurance claims No Actionable claims other than lottery, betting and gambling are neither the goods nor the services, so question does not arise to check the test of aggregate

turnover

Sale of Land No Neither the goods nor the services, so question does not arise to check the test of aggregate turnover- Para 5 of Schedule III
Sale of Building (Where part of the consideration has been received before issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.) Yes [2/3rd of the amount

charged]

Para 5(b) of Schedule II
Sale of Building (Where entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.) No Para 5(b) of Schedule III
Sale of Liquor, Natural Gas, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel Yes These are non-taxable supply and included in the definition of exempt supply as given u/s 2(47) of CGST Act
Commission Income Yes Supply of services
Discount income No Not a supply
Types of income Will it be part of aggregate turnover? Reason
Sale of furniture, Plant & Machinery Yes Supply of goods
Income from Royalty Yes Supply of services
Income from any treatment or process undertaken by a person on goods belonging to another registered person [i.e. Job work] Yes Supply of services
Income from any treatment or process undertaken by a person on goods belonging to another unregistered person Yes Supply of services
Sale of wastage and scrap Yes Supply of goods
Duty Drawback No Not a supply
Provisions written back No Not a supply
Stale cheques written back No Not a supply
Slump Sale Yes Exempt supply
Sitting Fee received by independent director Yes Supply of services
Partner’s salary as partner from partnership firm No No
Salary/Remuneration as an Executive Director from Company No No
Interest income on partner’s fixed capital credited to partner’s capital account Yes No
Interest income on partner’s variable capital credited to partner’s capital account Yes No
Insurance claim received on life insurance policies No

4. Practical Issues

Case 1: Mr. Krishna is submitting you the below information and asking you to submit the report on applicability of Reconciliation statement.

Particulars Situation 1 for FYs 2020-21 Situation 2 for FYs

2018-19 & 

2019-20

Situation 3 for FY 2017-18
April  to June 100 Lakhs 110 Lakhs 45 Lakhs
July to September 150 Lakhs 140 Lakhs 55 Lakhs
October to December 100 Lakhs 150 Lakhs 60 Lakhs
January to February 200 Lakhs 180 Lakhs 100 Lakhs
Total 550 Lakhs 580 Lakhs 260 Lakhs

Legal Position: For FY 2020-21: Aggregate turnover of Mr. Krishna exceeds INR 5 cr. so he is required to furnish annual return as well as reconciliation statement.

Registered person whose aggregate turnover during a financial year exceeds five crore rupees, shall also furnish a self-certified reconciliation statement as specified under section 44 in FORM GSTR-9C along with the annual return referred to in sub-rule (1), on or before the thirty-first day of December following the end of such financial year, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

FYs 2018-19 and FY 2019-20: For financial years 2018-19 and 2019-20, the limit is extended to INR 5Cr. So in FY 2018-19, Mr. Krishna is liable to furnish the annual return (exceeding Rs. 2 cr.) as well as liable to audit u/s. 35(5) in the given instance.

FY 2017-18: Aggregate turnover of MR. Krishna exceeds INR 2 cr. in GST period, so he will be liable to furnish the annual return and also liable to get its accounts etc. audited as per section 35(5)   for FY 2017-18. This note is relevant for FY 2017-18 only but case studies are relevant for ongoing FY as well: It was a burning issue so far as the interpretation is concerned that whether aggregate turnover of FY shall be computed for FY 2017-18 (i.e. April 2017 to 2018) or July 17 to March 2018. Technical guide of ICAI stated to take the figure of April 17 to March 2018 and on 14-6-2019, GSTN clarified (instead of the fact that it is not the body for making the law) that for the computation of aggregate turnover of FY 2017-18, the quantum of April 2017 to March 2018 shall be taken into consideration. But we had a considered opinion that it should be taken for July 2017 to March 2018. Aggregate turnover is defined u/s 2(6) of CGST Act and which cannot be applied for a period of non-GST regime. Authors in earlier publications stated that aggregate turnover is the terminology of GST Law and same cannot be applied for non-GST period. ICAI view is considerate view.

Fortunately, later on it was clarified that period of July 2017 to March 2018 shall only be taken for the computation of aggregate turnover of FY 2017-18.

Case  2: The following persons are registered in GST laws under different states. Submit the legal position of aggregate turnover and applicability of annual return and reconciliation statement for F.Y. 2020-21.

Person/ State Uttar

Pradesh

Rajasthan Madhya Pradesh Maharashtra Delhi Total
X Ltd. 1,00,00,000 1,00,00,000 1,00,00,000 1,00,00,000 1,00,00,000 5,00,00,000
Y Ltd. 50,00,000 90,00,000 10,00,000 40,00,000 5,00,000 1,95,00,000
Z Ltd. 1,00,00,000 2,50,00,000 2,50,00,000 1,00,00,000 7,00,00,000
A Ltd. 1,50,00,000 1,30,00,000 1,50,00,000 1,70,00,000 10,00,000 6,10,00,000

Legal position: For FY 2020-21

In case of X Ltd. Annual return is required to be furnished as the aggregate turnover is exceeding the limit of INR 2 Crore but it is not required to furnish reconciliation statement because the aggregate turnover does not exceed INR 5 Crore.

In case of Y Ltd. Neither annual return nor reconciliation statement is not required to be furnished as the aggregate turnover does not exceeds INR 2 Crore.

In case of Z Ltd. and A Ltd. Annual return is required to be furnished as the aggregate turnover is exceeding the limit of INR 2 Crore as well as required to furnish reconci- liation statement because the aggregate turnover exceeds INR 5 Crore.

Case 3: Mr Ankit Raipuria is providing multiple services as below. Submit the legal position of aggregate turnover and applicability of reconciliation statement for F.Y. 2020-21.

Particulars Amount
A. Taxable supplies 1,00,00,000
B. Exempt supplies 2,00,00,000
C. Export of goods/services 1,00,00,000
D. Inter State Supplies 50,00,000
E. Non-GST Supplies 50,00,000
F. Value of inward supplies on which tax is paid under reverse charge

mechanism

20,00,000
Gross Total 5,20,00,000

Legal Position:

Aggregate Turnover (A+B+C+D+E) as per sec. 2(6) of CGST Act, 2017 is ` 5,00,00,000. Value of F is not considered while computing the aggregate turnover as per sec. 2(6) It may be noted that—  u As per section 2(6):  Aggregate turnover comprises of exempt supply.

    • As per sec. 2(47), exempt supply considers the element of non taxable supply inter alia.
    • As per sec. 2(78), “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act. In other words it is non-GST supply (e. Alcohol for human consumption and 5 petroleum products as given u/ss. 9(2) of CGST Act and 5(2) of IGST Act i.e. petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel). So the conclusion is that aggregate turnover includes non-GST supply as well.
    • For FY 2020-21: Sec. 35(5) omitted w.e.f. 1-8-2021 instead the registered person is required to furnish reconciliation statement if the aggregate turnover exceed ` 5 Crores. For FYs 2018-19 and 2019-20.
    • For financial year 2018-19, the limit for audit is extended to ` 5 Cr. So in FY
      2018-19, he will be liable to furnish the annual return (exceeding ` 2 cr.) but he
      will not be liable to audit u/s 35(5) in the given instance ( as aggregate turnover
      does not exceed INR 5 Cr).
    • FY 2017-18: Aggregate turnover if exceeds ` 2 cr. in 1 July, 2017 to 31 march, 2018, then he will be liable to furnish the annual return and also liable to get his accounts etc. audited as per section 35(5) for FY 2017-18.

Case 4: Mr. Kapsa (Registered person) is providing GTA Services and other taxable services to his clients. Submit the legal position of aggregate turnover and applicability of annual return and reconciliation statement.

Particulars Amount
A. Taxable supplies 10,00,000
B. Exempt supplies
C. Export of goods/services
D. Inter-State Supplies
E. Value of inward supplies on which tax is paid under reverse charge

mechanism

F. Value of outward supplies on which tax is paid under reverse charge mechanism by the recipient of the supplies. (Note 1) 2,10,00,000

Legal Position:

    • Aggregate Turnover is ` 2,20,00,000.
    • As per the Entry No. 2 of Notification No. 13/2017-CT(R) the goods transport
      services provided by GTA to any business entity is covered under RCM. It is
      outward supply for the Mr. Kapsa
    • For FY 2020-21, sec. 35(5) is omitted w.e.f. 1-8-2021. Though as per section
      44 of CGST Act, registered person is required to file annual return if turnover
      exceeds INR 2 Crore and also required to furnish reconciliation statement if
      the aggregate turnover exceeds INR 5 Crores.
      Therefore, in this case the annual return is applicable but not the reconciliation
      statement.
    • For FYs 2018-19 and 2019-20: He will be liable to furnish the annual return
      (as aggregate turnover is exceeding 2 cr.) but he is not liable to audit u/s 35(5)
      in the given instance (as aggregate turnover does not exceed INR 5 Cr. of any
      one).
    • FY 2017-18 : Aggregate turnover if exceeds ` 2 cr. in 1 July, 2017, to 31 march,
      2018, then he will be liable to furnish the annual return and also liable to get
      his accounts etc. audited as per section 35(5) for FY 2017-18.

Case 5: Mrs. XYZ, an advocate is providing the services of below category from Rajasthan. Compute the aggregate turnover.  Submit the legal position of aggregate turnover and applicability of reconciliation statement.

Particulars Amount
A. Taxable supplies (Residential Property let out for commercial purpose) 50,00,001
B. Exempt supplies (Interest on loan given) 50,00,000
C. Export of goods/services
D. Inter-State Supplies
E. Non GST Supplies
F. Value of inward supplies on which tax is paid under reverse charge

mechanism

G. Value of outward supplies on which tax is to be paid under reverse charge mechanism by the recipient of the supplies 1,00,00,000

Legal Position:

    • Aggregate Turnover (A+B+G) as per sec. 2(6) of CGST Act, 2017 is ` 2,00,00,001.
    • XYZ is an advocate still in this case she is liable to be registered as per sec. 22(1) as her aggregate turnover is crossing the threshold limit of ` 20 Lakhs.

(A) If it is the case of FY 2020-21: (a) A Registered person is required to furnish annual return if turnover exceeds ` 2 Crore. (b) Sec. 35(5) is omitted w.e.f. 1-8-2021 though the registered person is required to furnish reconciliation statement if the aggregate turnover exceeds ` 5 Crores.

(B) If it is the case of FY 2018-19: For financial year 2018-19, the limit is
extended to ` 5 Cr. So in FY 2018-19, he will neither be liable to furnish the
annual return (not exceeding Rs. 2 cr.) nor he is liable to audit u/s 35(5) in the
given instance (as aggregate turnover does not exceed INR 5 Cr ).

(C) If it is the case of FY 2017-18: He is crossing the aggregate turnover in
a FY beyond ` 2 cr. in GST period, so she will be liable to furnish the annual
return and also liable to get its accounts etc. audited as per section 35(5) For
FY 2017-18.

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