What is Annual Aggregate Turnover, and How to calculate it?

In the Indian Goods and Services Tax framework, it is crucial to understand the Annual Aggregate Turnover for businesses (AATO). It determines key aspects of taxations such as GST registration requirements, eligibility for simplified tax schemes, and compliance obligations. It encompasses the total value of various types of supplies made across India under a single Permanent Account Number. Accurate calculation of AATO ensures that businesses adhere to GST regulations and avoid potential penalties. In this article, what is Annual Aggregate Turnover, you will know about the components of AATO, its significance, and the method to compute it effectively.

What is Annual Aggregate Turnover?

Annual Aggregate Turnover refers to the total value of all taxable supplies, exempt supplies, exports of goods or services, and inter-state supplies made by a taxpayer during a financial year across India, excluding taxes like GST. It helps determine GST registration eligibility and applicable tax schemes.

Components Included in AATO

1. Taxable Supplies

These are goods or services on which GST is charged. It excludes inward supplies liable under reverse charge.

2. Exempt Supplies

Supplies that attract no GST, including items like fresh fruits, education, or health services. Still counted in AATO despite no tax.

3. Exports of Goods or Services

Supplies sent outside India, treated as zero-rated under GST. These are included in AATO even though they are tax-free.

4. Inter-State Supplies

Transactions between different states, including stock transfers. Important for determining GST registration threshold.

5. Zero-Rated Supplies

Supplies such as exports and supplies to SEZs where GST is not levied but input tax credit is claimable. Included fully in AATO.

Purpose of Calculating Annual Aggregate Turnover

Annual Aggregate Turnover (AATO) under GST is the total turnover across all states for a PAN, including taxable, exempt, export, and inter-state supplies, excluding taxes and reverse charge inward supplies.

1. Determining Eligibility for GST Registration

Businesses must register for GST when their Annual Aggregate Turnover exceeds specific thresholds in India. For suppliers of goods, the threshold is Rs.40 lakh in most states and Rs.20 lakh in special category states like Manipur, Mizoram, Nagaland, and Tripura. For service providers, the limit is Rs.20 lakh across most states and Rs.10 lakh in special category states.

Additionally, if a business engages in interstate supplies or sells through e-commerce platforms, GST registration is mandatory regardless of turnover. Exceeding these limits without registration can lead to penalties and legal issues.

2. Assessing Applicability of the Composition Scheme

The GST Composition Scheme offers a simplified tax regime for small businesses, which allows them to pay GST at a fixed rate with reduced compliance. Eligibility is based on Annual Aggregate Turnover up to Rs.1.5 crore for most states and Rs.75 lakh for special category states like Manipur, Mizoram, Nagaland, and Tripura. Service providers can opt for the scheme if their turnover is up to Rs.50 lakh. This scheme is ideal for businesses that operate within a single state and are not involved in interstate sales or e-commerce. It simplifies tax obligations by reducing paperwork and offering lower tax rates.

3. Deciding the Frequency of GST Return Filings

The frequency of GST return filing is determined by a business's Annual Aggregate Turnover. Businesses with an AATO up to Rs.5 crore can opt for the Quarterly Return Monthly Payment scheme, which allows them to file GSTR-1 and GSTR-3B returns quarterly while making monthly tax payments. This scheme simplifies compliance for small taxpayers. However, businesses with an AATO exceeding Rs.5 crore are required to file both GSTR-1 and GSTR-3B returns monthly. Selection of the appropriate filing frequency based on turnover ensures efficient tax compliance and helps manage administrative responsibilities effectively.

4. Evaluating the Requirement for E-Invoicing

Businesses in India with an Annual Aggregate Turnover exceeding Rs.10 crore must generate e-invoices for B2B transactions and upload them to the Invoice Registration Portal within 30 days of issuance. This new rule expands the compliance net, previously applicable only to businesses with AATO above Rs.100 crore. Failure to upload invoices within the stipulated timeframe will result in automatic rejection by the IRP, rendering the invoices invalid for Input Tax Credit claims. Timely compliance is crucial to avoid penalties and ensure seamless operations.

What is Excluded from AATO?

When you calculate Annual Aggregate Turnover, certain items must be excluded to ensure accurate assessment. These exclusions help in the determination of the correct tax obligations and eligibility for GST registration.

1. Inward Supplies on Reverse Charge Mechanism

When a registered person receives goods or services from an unregistered supplier, the recipient is liable to pay GST under the Reverse Charge Mechanism. The value of these inward supplies is excluded from the AATO calculation in the hands of the recipient.

2. Taxes Paid

The GST paid under Central Goods and Services Tax, State Goods and Services Tax, Integrated Goods and Services Tax, or Union Territory Goods and Services Tax is excluded from the AATO calculation. This exclusion prevents the turnover from being artificially inflated by taxes that are collected on behalf of the government.

3. Interest or Discount on Loans

Any interest or discount received on loans or advances is excluded from the AATO calculation. This is because such financial transactions do not constitute a supply of goods or services under GST and are, therefore, not part of the aggregate turnover.

Understanding these exclusions is essential for accurately calculating AATO and determining GST obligations. For more detailed information, you can refer to the official GST portal or consult with a tax professional.

GST Registration Thresholds

The requirement for GST registration is determined by the Annual Aggregate Turnover. For businesses in normal category states, registration is mandatory if the AATO exceeds Rs.40 lakh for goods or Rs.20 lakh for services. In special category states, the thresholds are Rs.20 lakh for goods and Rs.10 lakh for services. Special category states include Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand.

How to Calculate Annual Aggregate Turnover?

To calculate AATO, you need to add the value of all sales and stock transfers mentioned under GST. This includes both taxable and exempt supplies.

Example 1: For Normal Category States

Mr. A owns a tea estate and sells tea leaves worth Rs.2.10 crore in a year. Since tea leaves are exempt from GST, this amount is exempt from turnover. He also sells plastic bags separately, earning Rs.7 lakh, which is taxable.

• Exempt turnover: Rs.2.10 crore
• Taxable turnover: Rs.7 lakh

So, Annual aggregate turnover = Rs.2.10 crore (exempt) + Rs.7 lakh (taxable) = Rs.2.17 crore

Since Mr. A’s turnover exceeds the Rs.40 lakh registration limit for normal states, he must register under GST. However, he cannot opt for the composition scheme as his turnover is over Rs.1.5 crore.

Example 2: For Special Category States

Special category states include Assam, Jammu & Kashmir, Nagaland, and others. Some of these states have a lower GST registration threshold of Rs.20 lakh.

Mr. B, a farmer in Nagaland, sells crops worth Rs.28 lakh (exempt supply) and plastic bags worth Rs.1 lakh (taxable supply).

• Exempt turnover: Rs.28 lakh
• Taxable turnover: Rs.1 lakh

Annual aggregate turnover = Rs.28 lakh + Rs.1 lakh = Rs.29 lakh

Since his turnover exceeds the Rs.20 lakh threshold for special category states, Mr. B must register under GST.

This method of adding all supplies helps decide if GST registration is mandatory. The government’s official GST rules guide these thresholds to ensure correct compliance.

Importance of Annual Aggregate Turnover Calculation

Calculating Annual Aggregate Turnover is essential for businesses under the Goods and Services Tax regime in India, as it determines several compliance requirements and eligibility criteria:

1. GST Registration Eligibility

AATO helps ascertain whether a business must register for GST. Typically, businesses supplying goods with an annual turnover exceeding Rs.40 lakhs and Rs.20 lakhs for special category states are required to register. For service providers, the threshold is Rs.20 lakhs and Rs.10 lakhs for special category states.

2. Composition Scheme Applicability

Small taxpayers with an AATO up to Rs.1.5 crores and Rs.75 lakhs for special category states can opt for the Composition Scheme. This scheme allows them to pay tax at a lower rate with simplified compliance requirements.

3. GST Return Filing Frequency

AATO influences the frequency of GST return filings. Businesses with an AATO up to Rs.5 crores can file quarterly returns under the Quarterly Return Monthly Payment scheme, while those exceeding Rs.5 crores must file monthly.

4. E-Invoicing Requirements

E-invoicing becomes mandatory for businesses whose AATO exceeds Rs.10 crores. This system requires eligible businesses to generate invoices through the GST portal. It ensures real-time reporting and reduction of tax evasion.

5. Evaluation of Audit Requirements

Businesses with an AATO exceeding Rs.2 crore are required to undergo a GST audit. This audit ensures the accuracy of financial records and compliance with GST laws.

Difference Between AATO and Turnover in State/UT

Understanding the distinction between Annual Aggregate Turnover and Turnover in State is crucial for businesses to ensure compliance with the Goods and Services Tax regulations in India.

• Definition of 'Turnover in State' under GST

As per Section 2(112) of the Central Goods and Services Tax (CGST) Act, "Turnover in State" refers to the aggregate value of all taxable supplies, exempt supplies, exports of goods or services, and inter-state supplies of goods or services made from the State or Union Territory by the said taxable person. It excludes taxes such as CGST, SGST, UTGST, IGST, and cess.

Key Differences Between AATO and Turnover in State

Common Mistakes in Calculating AATO

Common mistakes in calculating Annual Aggregate Turnover can lead to compliance issues under India's Goods and Services Tax regime. A frequent error is including GST amounts in the turnover calculation.

However, AATO should only reflect the value of supplies, excluding taxes like CGST, SGST, IGST, and cess. Another common mistake is omitting exempt supplies and exports from the turnover, which are essential components of AATO. Additionally, misclassifying interstate supplies as intra-state can distort the turnover figure, which can affect GST registration eligibility and other compliance requirements.

Conclusion

In this article, ‘What is Annual Aggregate Turnover, and How to Calculate it?’, you have understood accurately that calculating your Annual Aggregate Turnover is crucial for the determination of GST registration requirements, eligibility for simplified tax schemes, and compliance obligations under India's Goods and Services Tax framework.

Online Legal India simplifies this process by offering expert assistance in GST registration and Income tax return filing. Their team ensures swift processing, which helps you obtain your GSTIN promptly and maintain compliance effortlessly. Additionally, they provide comprehensive support for company registration, trademark filing, and other legal services essential for your business. Contact our experts today.