Understanding Turnover in GST and Its Exclusions

What is GST and Turnover?

In the context of Goods and Services Tax (GST), the GST itself is not included in the total turnover. This can be a confusing point for businesses needing to understand their financial obligations for GST registration, compliance, and tax liability calculations. Here, we break down the concepts and clarify the relationship between turnover and GST.

Total Turnover and GST

Total Turnover refers to the total sales value of goods and services before any taxes are applied. This is the figure generated by a business from its operations before considering the value-added tax.

Goods and Services Tax (GST) is a tax levied on the supply of goods and services. While it is based on the total turnover, the GST amount is not included in the turnover figure. This distinction is crucial for businesses to accurately calculate their GST liabilities and comply with tax regulations.

Aggregate Turnover in CGST Act

The term Aggregate Turnover is used in the Central Goods and Services Tax (CGST) Act, Section 26. It is a broader term that includes certain supplies but excludes other taxes and levies. Here’s a detailed breakdown:

What Does Aggregate Turnover Include?

Outward Supplies: Sales and supplies to other individuals or businesses Exempt Supplies: Supplies that are exempt from tax under the GST laws Exports of Goods or Services: Goods and services exported from the country Supplies of Persons Having the Same Permanent Account Number (PAN): Calculated on an all-India basis

What Does Aggregate Turnover Exclude?

Integrated Goods and Services Tax (IGST): A tax levied on inter-state supplies of goods and services Cess: Additional taxes or levies collected under the GST regime Inward Supplies on Which Tax is Payable Under Reverse Charge: Supplies where the tax is charged to the recipient

Clarification from a Chartered Accountant

A Chartered Accountant, CA Nisarg Shah, provides a clear explanation that total turnover for GST purposes is the total sale value of goods and services supplied by a business to another person, excluding GST. He emphasizes that the total turnover is ex-GST and represents the pre-tax sales value.

When registering for GST, calculating returns, and determining tax liabilities, it is essential to accurately calculate the total turnover, understanding that GST is not included in this figure.

Conclusion

Understanding the difference between turnover and GST is fundamental for businesses operating under the GST regime. The aggregate turnover, as defined in the CGST Act, provides a clearer picture of the taxes and supplies included and excluded. Properly navigating these concepts helps businesses stay compliant and manage their financial obligations efficiently.