Under GST Act, if a business entity or a business owner supplying goods and services earns a turnover above the threshold limit specified by the GST Act then such entity or owner should take a mandatory registration under the GST and pay the taxes as the liability arises. For this, it is mandatory that the aggregate turnover is computed so as to see if the same is crossing the threshold limit.
What is Aggregate Turnover?
Taking virtue of the GST Law or the GST Act, we can say that aggregate turnover is the aggregate value of the taxable supplies that are made by the business entity or the owner of the entity. But it shall exclude the following while computing the aggregate turnover for a relevant financial year:
– Value of the supplies which are made inward to the entity and the tax liability of the same shall be met and paid by another person under the Reverse Charge Mechanism (RCM), and
– Taxes like Central (CGTS), State (SGST), Union Territory (UTGST), Integrated (IGST), and Cess.
But it shall include:
– Supplies that are exempt
– Goods or services or both which are exported
– Inter-state supplies which the taxpayers do with the same PAN (Permanent Account Number)
For the computation of aggregate turnover, the financial year shall be considered. This shall start from 1st of April one year and end on 31st of March of the next year making the same 1 financial year. The turnover shall be computed on PAN level, which means that the turnover shall be computed by putting all the ones with common GSTINs together. Hence, we can say that it shall be a sum of:
– Supply value of taxable one’s
– Supplies that are exempt
– Goods or services or both which are exported
– Inter-state supplies, which are done by the taxpayers with the same PAN (Permanent Account Number)
Value of the supplies that are made inward to the entity and the tax liability of the same shall be met and paid by another person under the Reverse Charge Mechanism (RCM):
As per the GST Act, certain supplies that the supplier makes, like Goods, Transport Services, or services that are received from a person residing out of India, and such other services as per the list, require the recipient of the service to pay tax or GST under the RCM. This, due to this same reason, shall not fall under the purview of turnover and shall not form part of the aggregate turnover computation for the purpose of the applicability of GST registration.
It shall also be noted that the meaning of turnover in the case of the state is different, as the state level turnover of all the businesses with the same PAN shall be computed for testing eligibility of the Composition Scheme which is available to the business owners under the GST.
Let’s take an example to understand aggregate turnover computation under GST. Mr. A is a vendor who sells meat and fish. The turnover earned by him during the year from the supply of such meat and fish, which is exempted under GST, is INR 50 Lakhs. Mr. A also supplies a wrapping cover, which is a plastic-based wrap type bag, with each sale and charges a small extra amount for the same. During the year, the turnover from the sale of such bags was INR 3 Lakhs and this is a taxable service. Now, for the purpose of GST applicability, Mr. A wants to compute his aggregate turnover, and this shall be INR 53 Lakhs as exempted supply shall also be included in the same. So, even if the taxable supply is below INR 40 Lakhs, he shall be eligible for GST registration as the total turnover is more than INR 40 Lakhs.
Effect of this Requirement
When the GST Act and its allied provisions stipulate the adding of exempt services in the computation of aggregate turnover, we can see that many small businesses would be affected as they should mandatorily take registration under GST. This would not mandate or make them pay GST on any exempt services but would increase their compliance cost as they should file monthly returns under the GST Act declaring their supply.
Threshold Limit for GST Registration
The 32nd GST Council Meeting which was held on the 10th day of January 2019 revised the threshold limit which was specified for availing mandatory registration under GST.
Earlier, the limit that was mandated by the GST Act for availing mandatory registration in case of the supply of goods or services was as follows:
– Turnover exceeds INR 20 Lakhs in case of Normal Category States
– Turnover exceeds INR 10 Lakhs in case of Special Category States
But the revised threshold exemption is as below:
For supply of Goods:
a.i) Turnover exceeds INR 40 Lakhs in case of Normal Category States
a.ii) Turnover exceeds INR 20 Lakhs in case of Special Category States
For supply of Services:
In the case of services, the old limit shall apply, which is:
b.i) Turnover exceeds INR 20 Lakhs in case of Normal Category States
b.ii) Turnover exceeds INR 10 Lakhs in case of Special Category States
The special category states which are specified above include the following:
- Arunachal Pradesh
- Assam
iii. Jammu & Kashmir
- Manipur
- Meghalaya
- Mizoram
vii. Nagaland
viii. Sikkim
- Tripura
- Himachal Pradesh
- Uttarakhand
Any other state shall be considered as the one belonging to the Normal Category States.
Thus, we can now conclude that the business entities and owners engaged in the supply of goods or services or both in the country of India shall make the constant computation of their aggregate turnover pertaining to the definition as given by the GST Act for verifying the applicability of GST registration for them. They shall also determine the state category they belong to, i.e., the Normal Category States or the Special Category States, such that the threshold limit shall also be ensured in such a manner.
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