GST Turnover v/s Income Tax Turnover
Disclosing Turnover under Goods and Service Tax and Income Tax is matter of confusion now-a-days. As GST Turnover definition is somewhat different from Income Tax Turnover. However, now both the department will exchange the information with each other. Therefore, one needs to take care in reporting turnover under Income Tax and GST.
What is Turnover under Income tax Act?
The term “Turnover” is generally used for Profits and Gains from Business and Profession in Income tax. The term has been defined in “Guidance note on terms used in Financial statements” published by ICAI which is the aggregate amount of sale of goods or services rendered by the enterprise. There are certain components which forms part of turnover definition such as income from sale of scrap though it is being shown under heading “miscellaneous income”, luxury tax collected by the hotels. Further, commission on sales is also included in turnover.
Some components do not form part of turnover such as GST, sales proceeds of fixed asset or sale proceed of any investment and sales return also has to be deducted.
However, trade discount can be deducted from sales as this would reduce the sales price but cash discounts are never deducted from turnover as it is based on payments in cash and has no relation with sales price.
What is Turnover under GST?
Turnover, in simple terms, is the total volume of business. However, the “Turnover” has been defined under the GST law. It means total value of all taxable supplies and exempt supplies including export of goods or services and inter-state supplies of goods or services. However, it does not include inward supplies on which tax is payable under Reverse charge. It also excludes Central tax, Sales tax, Union territory tax, integrated tax, composition cess, Job work supplies, transactions that are neither supply of goods or services and supplies which have provided outside India or received outside India. The value of turnover has to be calculated on the basis of same PAN nationwide.
The law says that certain supplies such as GTA services or Services from outside India are covered under Reverse charge supplies. But the value of such supplies on which tax is paid by recipient would not form part of turnover. However, these services would form part of turnover of supplier of such supplies.
The exempt supplies which forms part of turnover includes goods or services which is wholly exempt from tax or having a Nil rate of tax and it also includes Non-taxable supplies.
Further, Authority of Advance ruling (AAR) Gujrat concluded to include Interest amount in calculating Turnover irrespective of its nature i.e. Rent receipts, bank interest, interest on PPF deposit, interest on personal loans, etc.
GST Turnover v/s Income Tax Turnover
Now a days, Income tax department has started sharing Income Tax return data of business persons with GSTN officers to identify evasion of any tax through spoting the income mismatches under both the returns. So the point of importance here is that whether turnover under both the returns must be same and if not then what is thing that business persons should be prepared for?
First of all, turnover cannot be a one-to-one match under GST and Income tax law. However, this doesn’t mean that business person are relaxed with respect to this new checkpoint because department is going to analyse several trends and compliance in detail. Signing of MOU between these two departments ensure that business persons furnish same set of information under both the laws and the point where difference in information is traced, then the person would come under the surveillance of tax authorities. Some of the important areas being shared among these departments include status of filling of Income Tax Return (ITR), gross total income, turnover range, turnover ration and any other matter as required.
For an instance, a business person can report less income on basis of fake purchases under income tax law but when it comes to GST, the same has no control over that because all inward supplies would get auto-populated from the respective outward supplies of supplier. As a result inward supplies cannot be manipulated under GST return and if one tries to show less income by increasing fake purchases under income tax return, then it would clearly show the mismatch and then the business person has to face the consequences.
Contrary to above example, if a business person, instead of showing high purchases, reports less turnover under income tax to show less income. But such person won’t be able to show less sales in GST return as it would then block the input tax credit of Purchasing party and that would not be acceptable by the purchasing entity because turnover of supplier shall get auto-populated as inward supplies of purchaser.
Thus, in short, if there is a huge variance in turnover shown under income tax as against the turnover shown under GST, then the tax payer or the business person would come under lens of both the department.
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The author of the above article is CA Rahul Gaur.
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