Sale for Audit under GST
Q 1. What is the turnover that should be reckoned to determine the applicability of audit under GST?
Ans. Section 35(5) commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit” whereas
the relevant Rule 80(3) 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 also defined. In this backdrop the following understanding is relevant:
- 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;
- It is therefore, reasonable to interpret that the word turnover used in section 35(5) ought to be understood as aggregate turnover (PAN level).
For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) 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 limit 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. E.g. do not ignore taxable value of stock transfers while examining this threshold limit.
Q 2. Should the supply of alcohol for human consumption be included in determining the threshold limit of Rs. 2 crore by a person registered under GST?
Ans. The definition of aggregate turnover includes exempt turnover.
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.
Non-taxable supply is defined under section 2(78) of CGST Act to mean 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.
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. Hence, it becomes clear that 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 crore.
Q 3. Will the term ‘aggregate turnover’ includes stock transfers/ cross charges effected between branches located in two different States?
Ans. Section 2(6) of CGST/ SGST Act defines aggregate turnover to include ‘inter-State supplies of person having same PAN’. Thus, stock transfers/ cross charges of services provided from a branch located in one State to a branch located in another State will be included in the aggregate turnover of the branch supplying the goods/ services.
Q 4. Will the term ‘aggregate turnover’ includes stock transfers effected within the State having same GSTIN for determining the threshold limit?
Ans. The term ‘aggregate turnover’ shall not include stock transfers effected within the same State having single GSTIN for the purpose of determining the threshold limit. However, where more than one GSTINs has been taken for branches located in the same State, then such branch transfers shall be included for computing threshold limit of Rs.2 crore to identify applicability of this audit requirement.