Understand the Turnover Certificate from CA in India

A Turnover Certificate is an essential document. It is beneficial for tenders, bank loans, business credibility, and so on. A practicing Chartered Accountant generally issues this certificate. It is considered as an authentic proof of financial performance and business scale. A proper certificate of turnover helps to maintain business credibility. It also confirms the financial stability of a business. In this blog, you can get guidance about the Turnover Certificate.

What is a Turnover Certificate?

A Turnover Certificate is meant by an official document. This certificate is issued by a practicing Chartered Accountant (CA). It plays a key role in checking the total revenue or sales of a business for a specific timeframe. The certificate is considered as a crucial evidence of financial stability. It applies to:

a) Government tenders

b) Bank Loans

c) Credit facilities

d) Investor Due Diligence, etc

However, the issuance of this certificate mainly depends on:

a) Audited financial statements

b) GST returns

c) Income tax records.

This certificate remains a critical document for proving financial credibility. It is essential when dealing with banks, investors, and tender authorities.

Key Purposes of a Turnover Certificate in India

Listed below are the key purposes:

1. Government Tenders and Contracts

Many government, public sector undertakings (PSUs), and private tenders has set a minimum annual turnover criteria. A certificate confirms that that bidder meets these standards. The certificate mainly acts as a compulsory prequalification document. It shows that the applicant possesses sufficient financial resources to manage large projects.

2. Banking and Financial Services

Banks and financial institutions need this essential document. This allows accessing the creditworthiness of a customer. This applies when they approve term loans, working capital limits, or overdraft facilities.

The system established credit limits. It applies to trade finance institutions and LC (Letter of Credit) facilities.

3. Regulatory Compliance

This includes:

a) MSME Classification

The MSMED Act gives subsidies and benefits to businesses. Businesses must verify their turnover to meet their revised investment and turnover criteria.

b) Income Tax Audit (Section 44AB)

The Income Tax Audit (Section 44AB) report does not replace a tax audit report. It is because it requires Form 3CA/3CB. This helps establish whether a business needs an audit. The business has more than Rs. 1 crore or Rs. 10 crore threshold that depends on 5% cash transactions.

c) GST Compliance

The system checks business eligibility for the Composition Scheme. It allows businesses with turnovers up to Rs. 1.5 crore and Rs. 75 lakhs to use the system. This also verifies the Aggregate Annual Turnover (AATO) for e-invoicing. It also verifies HSN (Harmonized System of Nomenclature) reporting obligations.

4. Business Operations and Partnerships

It mainly contains:

a) Vendor Registration

Large companies need this turnover document for vendor registration. The registration of new vendors is based on their turnover. This helps them ascertain if the vendors can meet the supply demand.

b) Franchise or Dealership

Franchisors use this certificate to verify a potential dealer's or franchisee's financial strength. This verification helps determine if they can grow the business.

c) Investor Due Diligence

Startups and growing businesses need it to gain credibility. They must establish trust with angel investors and venture capitalists.

5. International Business

Export-Import Clearances. The foreign partners use it for export-import clearance procedures. They use it to determine the scale of business operations.

6. Other Business Purposes

The other business purposes can include:

a) Participation in Trade Exhibitions

Trade exhibition organizers use it to ensure that only authorized participants take part.

b) Brand Franchising

This shows if the franchisee has the necessary financial strength.

What are the Key Components of a Turnover Certificate?

Below are the key components:

· Name and address of the business

· Registration details under the relevant Act

· Purpose of the Turnover Certificate

· Certificate period

· Records checked during the certification process.

· Information about the person or organization that gave the certificate.

· Turnover Calculation methods

· Information regarding the practicing professional

· UDIN which means Unique Document Identification Number of the certifying CA

· Other required information

Who Needs a Turnover Certificate?

The following entities needs a Turnover Certificate:

a) Proprietorship and Partnership Firms

b) Exporters and Importers

c) Private Limited Companies

d) Startups and MSMEs (Micro, Small, and Medium Enterprises)

e) Applicants of business loans or working capital limits

f) Vendors and Contractors who applies for government tenders

g) Entities that are having benefits under government schemes

Documents Required for Turnover Certificate

Here are the key documents required for this certificate:

a) Name and details of the business entity

b) Audited Financial Statements

c) Income Tax Returns (ITR)

d) GST Filings

e) Bank Statements

f) Sales and Purchase Invoices

g) Business PAN and Registration Details

PAN card (proprietor or company), Registration Certificate (MSME/Udyam, GST, or Partnership Deed).

h) Documents for Proprietorships or Small Businesses

If not audited, it requires a books of accounts, sales registers, and bank statements.

i) Documents for Tenders

The certificate must include:

· Year-wise breakup

· Purpose of the certificate

· The signature of the CA's with stamp

j) Unique Document Identification Number (UDIN)

How to Get a Turnover Certificate?

Here are the steps to get a Turnover Certificate:

Step 1: Appoint a Chartered Accountant (CA)

As an applicant, you must hire a practicing Chartered Accountant (CA). CA will check your financial records and issue the certificate.

Step 2: Gather Required Documents

This step allows you to collect and prepare the necessary documents.

Step 3: Verification by CA

Then, the CA will check your:

a) Books of Accounts

b) Profit and Loss statements

c) Balance Sheet

This will confirm that the turnover figures are accurate.

Step 4: Issue of Certificate

The Chartered Accountant will issue the certificate on their letterhead. The certificate is signed and stamped. This also includes the Unique Document Identification Number (UDIN).

Step 5: Draft Approval

You will get a draft copy to check before the final certificate is issued.

Conclusion

A Turnover Certificate is a formal document. This document is created by a Chartered Accountant (CA). It generally shows a total income or sales of a company for a certain time. This allows tender applications, bank loan approvals, register with vendors and so on. So, it is important to have a certified document. The document confirms that the business is financially stable and trustworthy. This also helps to build trust with stakeholders. If you have any queries and need assistance about it, reach out to Online Legal India.

FAQ

Q1. What is a Turnover Certificate?

A Turnover Certificate refers to an official document. This usually shows the total income of a business for a certain time period. A Practicing Chartered Accountant (CA) issues this certificate. The certificate is needed for government tendering, bank loans, MSME registration, and more.

Q2. Who is allowed to Issue a Turnover Certificate in India?

Only a Practicing Chartered Accountant (CA) can officially issues this certificate in India.  It is because they registered with the Institute of Chartered Accountants of India (ICAI).

Q3. Can start-ups get a Turnover Certificate if they have low revenue?

Yes, start-ups can get a Turnover Certificate even if they have a low revenue.

Q4. Is UDIN Compulsory for a Turnover Certificate?

Yes UDIN is compulsory for getting this certificate. The UDIN is called the Unique Document Identification Number.

Q5. Can I get a Turnover Certificate if my business is not GST registered?

Yes, you can get this certificate if your business is not registered. This means if your turnover is low for GST registration, you can still get it. A CA can issue a turnover certificate on the basis of your Income Tax Returns (ITR), bank statements, and audited financial statements.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.