Calculating turnover for GST

Aggregate turnover is an important value that will help you determine whether you fall in the exempted category or you need to do the GST registration. Aggregate turnover is the taxable value of supply goods and services exempt from the export of goods and services and inter-state supply. The aggregate turnover is calculated on the basis of the pan India activities carried out by all the entities of the concerned individual. Following is a formula to calculate aggregate turnover:

Value of all (taxable supplies+ exports + exempt supplies + inter-state supplies) – (Taxes + Value of non-taxable supplies + Value of inward supplies + Value of supplies taxable under reverse charge)

This value should give you an aggregate turnover. If this value is less than 40 lakhs, then businesses are not required to register under GST.

Considerations

–       It is important to note that the increase in threshold limit is applicable only for businesses involved in the supply of goods. For service providers, the threshold limit will continue to be the same as the previous limit.

–       Businesses that are involved in the supply of inter-state goods will still have to register for GST irrespective of the aggregate turnover.

–       Section 24 of the GST Act has not been amended and any business that has been registered due to certain circumstances would continue to remain registered. Sellers selling via eCommerce websites such as Flipkart, Amazon, etc. will have to still register under GST.

–       Businesses have to carefully calculate the aggregate turnover as the criteria for registration is that value. An error in calculating the same could have problems for small-business a few years down the line.

–       There is no clarity on the service income and the threshold limit for the supply of service and goods is different. So, if your business is involved in the supply of goods, and you earn some income from rental or other such services, whether you are exempted or not will have to be determined. Not all cases are the same and it is best to consult a professional CA to get the best advice for your own business.

–       Persons that are required to register under Section 24 and suppliers of Ice Cream, and other edible ice, Pan Masala, Tobacco as well as its substitutes have to register under GST irrespective of the turnover.

–       While determining the aggregate turnover, it should be remembered that Section 17(5)(i) clearly states that if you believe you are not liable to pay tax, but the tax department thinks otherwise and you lose the appeal, you would not be eligible for an input tax credit.

Conclusion

The GST council strives to reduce the burden on businesses and make it easier for MSMEs to do business. These steps are taken periodically to assess the changing needs of the businesses. Along with the increase in exemption limit for GST, several items were shifted to lower slabs. Out of 230 items, 200 items were shifted to lower tax rates leaving only sin and luxury items in the 28% tax rate slab. Additionally, businesses opting for composting scheme can file a return just once a year provided, they pay tax every quarter.

Registering for GST is accompanied by several benefits apart from legal compliance. Your business is registered which gives you a branding opportunity and adds credibility. Registering for GST empowers you to get an input tax credit which is something non-registered businesses cannot do. It also improves the overall efficiency of your logistics. All your business purchases can benefit from tax input reducing the effective cost of purchase. The benefits of GST registration certainly outweigh the cons.

The procedure for GST registration of businesses that do not fall under the exempt category simple and hassle-free. Professional CA can help you in registration which can be done completely online without even visiting any government office. Provenience helps in GST registration with a dedicated account manager and at competitive costs. The process can be completed in merely 4-5 days with a completely online process. A dedicated account manager will share the details of all the documents required and will take care of the complete process.

So, even though the new GST threshold limit has been increased to Rs 40 lakhs, you can decide to opt for registration below the threshold as well on a voluntary basis if it benefits your business.    

1. It is considered as a separate legal entity

An entity implies something which has actual existence; a thing with a particular presence. An organization is a lawful element and a juristic individual set up under the Demonstration. A juristic individual is an individual who is not a human or person. In this way, an company type of association has a wide lawful limit and can buy the property and cause obligations. The members (Investors/managers) of an organization have no obligation to the lenders of an organization. Hence, a private company shall have a separate identity from its members.

2. Continuous presence

You must have already read it somewhere in the book of company law that a company has perpetual succession. In simple words, perpetual succession means continuous presence or existence. It can not die. Also, the death or retirement of any of its members won’t have any effect on the existence of the company.

3. A private limited company has limited liabilities:

It is another benefit of a private limited company that it has limited liability. In simple words, the shareholders of a company will only be liable to pay up to the amount of the face value of the shares at the time of its wind up. The shareholders of a Pvt. Ltd. Company won’t have to pay any amount over the face value of the shares of the company. For example, if the face value of a share of a company is 10 or 20 rupees. Then the shareholders, at the time of wind up of the company, won’t have to pay any amount over 10 or 20 rupees per share held (if any unpaid), as the case may be. It is a great benefit of registering your business to a private limited company.

4. The shares of a company can be transferred very easily and freely:

Another major benefit of registering your business into a private limited company is that the shareholders of it can transfer its shares to any other person very easily. Transfer does not require any extraordinary activity to be performed. The seller just needs to sign the form and transfer it to the buyer of the shares in exchange for some consideration.

5. A company can sue and can be sued in its capacity:

Another benefit of a company is that it can sue and can be sued in its capacity. In simple words, a company can take any person to the court for legal proceedings and can be taken to court by any person for legal proceedings. It has its capacity to act as a legal person.

All these points are a few benefits of Pvt. Ltd. company formation. These are not limited. Like these, there are more benefits such as borrowing capacity or dual relationship, etc.

The different kinds of company registration cost or the cost of starting up and operating a private limited company in India are mentioned below:

1. Starting Up or Incorporation – The cost and complexity of company registration has been reduced in India, to some extent, with the help of online registration. However, as the prices vary from state to state, so make sure to be careful about it. Anyways, besides that, you will also have to include the charge of DSC, TAN, and PAN in it, which would be around 1,500 INR as well.

The professional fees, too, depending on the share capital of your company. However, on average, it stays between 2,000 INR to 5,000 INR.   

• Business Registration: Irrespective of the type of your organization, you would require a proper Government-based registration. Previously, it was conducted through VAT and Service Tax Registration. However, after the implementation of GST, things have changed. Formerly, the cost of business registration used to vary from 15,000 INR to 30,000 INR. But, now, it has reduced to 10,000 INR to 20,000 INR. Nevertheless, the price would, further, depend on the state taxes and the overall complexity of the task.

The documents for company registration, in this aspect, will be –

• A self-attested copy of both Aadhar Card and PAN Card (of all the subscribers and directors)
• Passport-size photograph
• A self-attested copy of legal Identity Proof (either your Passport or Voter ID card or Aadhar Card or driving license)
• Proof of the address of the office (Utility Bill not older than 2 months and NOC from the owner of premises or Rent Agreement papers)
• Residential proof that isn’t older than two months (either your Electricity Bill or Mobile/Telephone Bill or Bank Statement)
• The e-mail address and the phone number of the director alongside some other basic details
• Sample signature of the Authorized Signatory for registering under Agile Pro

Now, the services for starting a business are integrated and can be done simultaneously in one step. By using an integrated e-Form SPICe+, anyone setting up a Pvt Ltd company can apply for the following services:

• Name reservation
• Incorporation of a new company
• DIN allotment
• Profession Tax (Maharashtra)
• Bank Account Opening
• PAN
• TAN
• EPFO
• ESIC
• GSTIN

• Mandatory Compliances: There are certain compliances laid by the Ministry of Corporate affairs which any private limited company is bound to obey. This includes the Appointment of a Statutory Auditor, Filing of form for Commencement of Business, Conducting of board meetings and its documentation thereof, Filing of Financial Statement & Annual Return, and KYC of Directors. The government fee in this aspect generally revolves around 2,000 INR. On the other hand, the professional fees generally vary from 5,000 INR to 12,000 INR per month.

• Event-Based Compliances – Event-Based compliances are to be done with the occurrence of certain events like change in directors, change of registered office, and change in authorized share capital, the rise of paid-up share capital, and so on. These events readily demand compliances to avoid any kind of additional penalties or other fees. The price for the event-based compliances generally depends on the compliances that you choose. Nonetheless, if you have to opt for the right professionals, then you may have to pay around 3,500 INR to 8,000 INR.

• Miscellaneous Compliances – There are certain aspects of a company that MCA keeps a track of. If any change takes place in any of those aspects, it is imperative that those changes are informed. Like the aforementioned compliances, this one, too, shall have a government fee and a professional charge. A private limited company can expect a professional fee of 1,500 INR onwards, depending on the complexity of the job.

• Accounting and Auditing – This cost is not just confined to private limited company registration. Any and every company registration must have their account books and audit files ready at all times. It is expected of a company to pay at least Rs. 5000 a month depending on the number of entries obviously. Though auditing is not mandatory for proprietorships and partnerships, it is compulsory for private limited companies. The annual cost for auditing would be around 15,000 INR to 20,000 INR.

It is to be remembered that apart from these things, there are also a few minimum needs for company registration which are as follows –

• Minimum of two Shareholders
• Minimum of two directors
• At least one director should be an Indian Resident.

Conclusion

Thus, starting up a company is one thing but successfully operating a private limited company needs dedication, time, and professional help. Company registration is a one-time cost but there are a lot of compliances that follow after which need to be taken care of.