Total Turnover is an important concept in Indian taxation law, particularly under the Income Tax Act, 1961 and the Goods and Services Tax (GST) framework. The concept of total turnover is used to determine the tax liability of a business, eligibility for certain deductions, applicability of tax audit requirements, and eligibility for the composition scheme under GST. Understanding the correct meaning and computation of total turnover is essential for proper tax compliance by businesses in India.
Meaning of Total Turnover Under Income Tax Act
Under the Income Tax Act, 1961, the term "total turnover" is not separately defined but is used in several provisions. It generally refers to the total amount of sales or gross receipts of a business during a previous year, before deducting any expenses.
The concept of total turnover is particularly important in the following contexts:
1. Tax Audit under Section 44AB Under Section 44AB of the Income Tax Act, a person carrying on business is required to get his accounts audited by a Chartered Accountant if his total sales, turnover, or gross receipts exceed:
- ₹1 crore in the case of a business (increased to ₹10 crores if cash transactions are less than 5% of total transactions — introduced by Finance Act, 2021)
- ₹50 lakhs in the case of a profession
2. Presumptive Taxation under Section 44AD Under Section 44AD, eligible businesses with total turnover not exceeding ₹2 crores can opt for presumptive taxation. Under this scheme, income is presumed to be 8% of total turnover (or 6% if turnover is received through digital means), and the assessee is not required to maintain detailed accounts.
3. Deduction under Section 80IC and Section 80IB The computation of deductions under certain sections relating to special industries (like those in special economic zones or backward areas) is based on the total turnover of the business.
Meaning of Total Turnover Under GST
Under the Central Goods and Services Tax Act, 2017, "aggregate turnover" (which is the GST equivalent of total turnover) is defined under Section 2(6) as:
"Aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess."
In simple terms, aggregate turnover under GST includes:
- Taxable supplies — supplies on which GST is applicable
- Exempt supplies — supplies on which no GST is applicable
- Exports — goods and services exported outside India
- Inter-state supplies — supplies made across state borders
It excludes:
- GST itself (CGST, SGST, IGST, cess)
- Inward supplies on which tax is paid under Reverse Charge Mechanism
Importance of Aggregate Turnover Under GST
1. GST Registration Threshold A business must register for GST if its aggregate turnover exceeds:
- ₹40 lakhs for suppliers of goods (₹20 lakhs for special category states)
- ₹20 lakhs for suppliers of services (₹10 lakhs for special category states)
2. Composition Scheme Eligibility A taxpayer whose aggregate turnover does not exceed ₹1.5 crores (₹75 lakhs for special category states) can opt for the Composition Scheme under Section 10 of the CGST Act.
3. E-Invoice Requirement Businesses with aggregate turnover exceeding ₹5 crores are required to generate e-invoices for B2B (business-to-business) transactions.
4. Quarterly Return Filing (QRMP Scheme) Taxpayers with aggregate turnover up to ₹5 crores can opt for the Quarterly Return Monthly Payment (QRMP) Scheme under which GST returns are filed quarterly instead of monthly.
Components of Total Turnover
For Income Tax purposes, total turnover of a business includes:
1. Sales of goods — Total value of goods sold during the year 2. Gross receipts — Total receipts from services rendered 3. By-products — Value of by-products sold 4. Scrap — Value of scrap sold 5. Other business receipts — Any other receipts from the business
Total turnover generally excludes:
- GST collected from customers (since it is collected on behalf of the government)
- Returns and refunds
- Trade discounts
Total Turnover vs. Net Turnover
| Total Turnover | Net Turnover |
|---|---|
| Gross sales/receipts before deductions | Total turnover minus returns, discounts |
| Used for tax audit threshold | Used for profitability analysis |
| Includes all business receipts | Excludes certain adjustments |
Important Case Laws
1. CIT v. Pradip Kumar Malhotra (2011) The Calcutta High Court held that for the purpose of Section 44AB, total turnover means the gross amount received from the business and does not exclude any expenses or deductions.
2. CIT v. Surendra Prasad Agarwal (2009) The court held that turnover for the purpose of presumptive taxation under Section 44AD must be computed on a gross basis without netting off any expenses.
Conclusion
Total turnover is a fundamental concept in Indian taxation that determines a taxpayer's obligations with respect to tax audit, presumptive taxation, GST registration, and various other compliance requirements. Both the Income Tax Act and the GST framework use the concept of turnover as a key measure for determining tax thresholds and obligations. A proper understanding and accurate computation of total turnover is therefore essential for every business in India to ensure correct tax compliance and avoid penalties.
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