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GST~
Various factors need to be considered while arriving at the turnover figure for the financial year
1. Whether all heads of income as per financial statements need to be considered:
??Financial Statement of any company consists of various heads of income, few of which are directly related to generating income from business operations and few others which provide for income from indirect sources like interest on investments, commission income, etc. It is important to note here that all heads of incomes may it be direct or indirect to the business needs to be considered while arriving at the turnover figure as per financial statements.
It is important to note here that there is a high probability that there would be a mismatch in the turnover between books and the annual return due to non-payment of GST on indirect income heads. It is very likely and common to miss out on payment of GST on indirect incomes like:
??Profit on sale of fixed assets;
??Fine/ Amount collected from employees for reasons like late arrival, Id card lost, uniform, etc.;
??Commission Income;
??Scrap Sale; etc.
??If GST has been missed out to be paid on such incomes, it is obvious that the same must have not been considered in GSTR-1 and therefore resulting in mismatch between the turnover.
2. Whether exempt income needs to be considered while arriving at Turnover:
It is very likely that the income side in the financial statement of a person may include incomes from heads which are exempt under GST such as:
??Rental Income from a residential dwelling;
??Bank Interest
Dividend Income; etc.
??Now the question arises whether these exempt income need to be considered while arriving at the turnover figure. The answer is ‘Yes’. Point II of the Form GSTR -9C has been divided into 2 parts. The first part calculates the annual turnover under point 5P and the second part calculates the taxable turnover under point 7E. Therefore, it is to be noted that the first part consists of taxable + exempt turnover. Hence, if any income head is exempt under GST the same still needs to be considered under the first part while calculating the annual turnover. The form provides for reduction of value of exempted turnover under point 7B.
3. Treatment of provisions written back at the end of the financial year:
Provisions like provisions for bad and doubtful debts are created by the company’s estimating the risk associated with the debtors. However, it may so happen that the amount which was estimated to become a bad debt in the previous years is recovered and no longer are these provisions required. Therefore, in these situations, the provisions are written back and the recovery made is accounted under the income head.
It is pertinent to note here that even though the provision is written back, GST is not payable on the same, as the tax on it has already been deposited at the time when invoice was raised earlier. Now the question arises as to whether it is to be included in the total turnover to be reflected under table 5A. In this respect, it is noteworthy that such item on the income side of the financial statement of the company should not be included while arriving at the figure of the turnover as per books.
4. Turnover as per financial statements to be arrived at after considering all the rectifications of errors and omissions if any:
??It is very much known that revision of the return including GSTR -1 once filed is not permitted. The only way out to make any changes is by way of rectifying the mistake in the following months GSTR -1 by virtue of table 9A & table 9C.
The only problem which may arise is, if rectification of GSTR -1 for the financial year 17-18 is made between the period April’18 to September’18. Any rectification which has been carried out by the assessee after the end of the financial year in the following months returns, it is very important that impact of these changes should also be taken into considerations while arriving at the turnover figure as per books. These adjustments to the turnover can be reflected under table 5O in the form GSTR -9C.
5. Goods sold on sale or return basis, whether to be considered under Turnover:
??Concern arises especially for transactions taking place at the end of the financial year i.e. goods sold on sale or return basis especially during the month of February or March. As at the end of the financial year there exists uncertainty as to the actual sale of the goods. Such sales are recorded in the books by the vendor only when the customer signifies his intention to purchase the goods, the property in goods passes to the buyer. So long as the property does not pass to the buyer, the vendor does not record it as a sale and the customer is not debited with the sales price. Therefore, if goods are sold on sale or return basis in the month of February, the said sale would not have been reflected as turnover in the financial statements. However, if as per the time of supply provisions the sale is considered to be made in the current financial year (17-18) then the said transactions will have to be considered while arriving at the turnover. These sales have to be analyzed on case to case basis and after considering the time of supply provisions.
6. Turnover of goods sent for exhibitions:
Various vendors send their goods for exhibitions, one of the best examples being jewellery items. In these situations the suppliers are not able to ascertain the actual supplies and the buyers at the time when the goods are moved out for an exhibition. The government has also issued a clarification in respect of jewellery by way of circular no. 10/10/2017 –GST dated 18.10.17 stating that goods that are taken out for supply on approval basis can be moved on a delivery challan and the invoice can be issued at the time of delivery of goods.
Hence, sale will be recognized only when the customer buys it at the exhibition.
?? Therefore, if any goods that have been moved out for an exhibition in the month of March, and actually sold to customer in month of April’18, these sales need not be considered in the turnover for the financial year 17-18. |
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