Don’t only take Profit & Loss Account Turnover for GST Audit Limit

Q . What is the turnover that should be reckoned to determine the applicability of audit under GST?

Ans. Section 35(5) of CGST Act 2017 commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit”

whereas the relevant Rule 80(3) of CGST Rules 2017  uses the expression “every registered person whose aggregate turnover during a financial year exceeds two crore rupees”.

It must be noted that the word turnover has not been defined whereas the expressions aggregate turnover has been defined.

One may note that the expression turnover in State or turnover in Union territory is defined. In this backdrop the following understanding is relevant:

a) Aggregate turnover is PAN based while turnover in a State / UT is similarly worded except to the extent that turnover in a State / UT is limited to a State;

b) It is therefore, reasonable to interpret that the word turnover used in Section 35(5) of CGST Act 2017 ought to be understood as aggregate turnover (PAN level).

c) For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant Section 35(5) of CGST Act 2017 uses the expression financial year;

Therefore, in the absence of clarification from Government and to avoid any cases of default, it is reasonable to reckon the turnover limits prescribed for audit i.e., Rs. 2 crores for the whole of the financial year which would also
include the first quarter of the financial year 2017-18.

Please also note that where the expression aggregate turnover (PAN level) is considered, please consider the taxable value under section 15 and not the amount as accounted in the books of accounts.

Example :- 

• Stock Transfer : Do not ignore taxable value of stock transfers while examining this threshold limit.
• Alcohol for human consumption : Exempt turnover is defined under CGST Act to mean supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services tax Act and includes non taxable supply.Section 9(1) of CGST/ SGST Act and Section 7(1) and 5(1) of UTGST and IGST Act respectively exclude alcoholic liquor for human consumption from the levy/charge of GST Alcoholic liquor for human consumption forms part of exempt turnover.Since aggregate turnover includes exempt turnover, value of alcoholic liquor for human consumption is to be included while computing threshold limit of Rs. 2 crores

 

 

 

 

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