Introduction of Turnover under GST
In simple terms, turnover refers to the total value of goods or services supplied by a business during a specific period. The GST law defines turnover as the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by the recipient) and exempt supplies made by a taxable person in a state. It also includes the value of exports, inter-state supplies, and supplies made to SEZ units or developers.
The turnover is calculated separately for each state or Union Territory (UT) where the business operates. This means that a business that operates in multiple states will have a turnover for each state, and the turnover for all the states will be added to arrive at the total turnover for the business.
The turnover plays a crucial role in the GST system as it determines various aspects, such as registration, tax liability, and eligibility for composition scheme. Let’s discuss these aspects in detail.
Registration:
A business is required to register under GST if its turnover exceeds the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states) in a financial year. The threshold limit for the service providers is Rs. 10 lakhs (Rs. 20 lakhs for special category states). The registration under GST is mandatory for all businesses that exceed the threshold limit, irrespective of whether they are engaged in the supply of goods or services.
Tax Liability:
The tax liability under GST is calculated based on the turnover of the business. The GST rates for goods and services vary, and the tax liability is calculated by applying the applicable tax rate to the value of the supplies made by the business.
Composition Scheme:
The GST law allows small businesses to opt for the composition scheme if their turnover does not exceed Rs. 1.5 crores. Under this scheme, the businesses are required to pay a fixed percentage of their turnover as tax, and they are not eligible to claim input tax credit.
In addition, turnover also plays a role in determining the eligibility for various GST schemes and exemptions. For instance, businesses with a turnover of up to Rs. 40 lakhs are eligible for the GST Composition Scheme, while businesses with a turnover of up to Rs. 20 lakhs (Rs. 10 lakhs for special category states) are exempt from GST registration.
The turnover also plays a role in determining the reverse charge mechanism under GST. Under this mechanism, the recipient of goods or services is liable to pay GST instead of the supplier if the supplier is unregistered or if the goods or services are supplied by certain specified categories of suppliers. The threshold limit for the reverse charge mechanism is Rs. 5,000 per day, which means that if the value of the goods or services received in a day exceeds Rs. 5,000, the recipient is liable to pay GST under the reverse charge mechanism.
One of the challenges businesses face with respect to turnover under GST is the determination of the place of supply. The place of supply refers to the location where the goods or services are supplied, and it determines the applicability of GST. In case of inter-state supplies or exports, the turnover is included in the turnover of the state from where the supplies were made. However, in case of intra-state supplies, the place of supply determines the state in which the turnover is to be included.
Another challenge is the determination of the value of supplies, especially in cases where the goods or services are supplied free of cost or at a concessional rate. In such cases, the value of the supplies is to be determined as per the GST law, and it should be included in the turnover of the business.
It is also essential for businesses to maintain accurate records of their turnover as any errors or discrepancies can lead to penalties and legal issues. The GST law provides for various penalties, such as late fees, interest, and penalties for non-compliance, which can be levied on businesses that do not comply with the GST law.
Conclusion
Turnover is a critical concept under the GST system, and businesses should ensure that they maintain accurate records of their turnover to comply with the GST law. The turnover determines various aspects such as registration, tax liability, threshold limits for filing of GST returns, eligibility for GST schemes and exemptions, and the reverse charge mechanism. By understanding the concept of turnover and its significance under the GST system, businesses can ensure that they comply with the GST law and avoid any penalties or legal issues.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q: What is turnover under GST?
A: Turnover under GST refers to the total value of all taxable supplies made by a business in a financial year, including supplies made within the state, inter-state supplies, and exports.
Q: How is turnover calculated under GST?
A: Turnover under GST is calculated by adding up the total value of all taxable supplies made by a business in a financial year. This includes the value of supplies made within the state, inter-state supplies, and exports. It excludes taxes levied under GST such as CGST, SGST, and IGST.
Q: Why is turnover important under GST?
A: Turnover is important under GST as it determines various aspects such as registration, tax liability, threshold limits for filing of GST returns, eligibility for GST schemes and exemptions, and the reverse charge mechanism.
Q: What is the threshold limit for GST registration based on turnover?
A: The threshold limit for GST registration is Rs. 20 lakhs (Rs. 10 lakhs for special category states) for businesses engaged in the supply of goods. For businesses engaged in the supply of services, the threshold limit is Rs. 10 lakhs (Rs. 20 lakhs for special category states).
Q: What is the threshold limit for filing quarterly GST returns based on turnover?
A: The threshold limit for filing quarterly GST returns is Rs. 1.5 crores. Businesses with a turnover of up to Rs. 1.5 crores can opt to file quarterly returns instead of monthly returns.
Q: What is the threshold limit for the reverse charge mechanism based on turnover?
A: The threshold limit for the reverse charge mechanism under GST is Rs. 5,000 per day. If the value of the goods or services received in a day exceeds Rs. 5,000, the recipient is liable to pay GST under the reverse charge mechanism.
Q: What is the Composition Scheme based on turnover? A: The Composition Scheme is a GST scheme that is available to businesses with a turnover of up to Rs. 1.5 crores. Businesses that opt for the Composition Scheme are required to pay a lower rate of GST, and they are also exempt from certain compliance requirements such as the maintenance of detailed records.
Q: How can businesses ensure compliance with the turnover requirements under GST? A: Businesses can ensure compliance with the turnover requirements under GST by maintaining accurate records of their turnover, including the value of all taxable supplies made within the state, inter-state supplies, and exports. They should also ensure that they file their GST returns on time, pay the correct amount of tax, and comply with all other requirements under the GST law.
