Income Tax Returns vs GST Annual Returns (GST Annual Return Check)

Confused about filing GST annual returns? Learn how to reconcile Income Tax Returns with GST Annual Returns and understand the turnover criteria.

During the course of  year end process, we used to receive lot of queries regarding the applicability of GST annual return ( i.e. GSTR 9 and 9C) for registered tax payers, as they have shown some income in other than PGBP like salary, capital gain, income from other source, house property in their income tax returns.

Primary question they put before us is, GST sales shown in monthly returns ( GSTR-3B)is less than the GST annual return filing limit of Rs.2Cr. But income shown in the income tax returns is more than Rs. 2Cr.

Now question arises is there any requirement to file GST annual returns in compliance with Sec 44 of CGST Act.

So, in this article I made the consolidation of all those queries which we have received during last financial year. So it may help/ guide you to take informed decisions.

Ex. “Baji Babu” a Registered tax payer in Karnataka. He is engaged in the business of sale of mobile phones. He has taken GST Registration for the same.

He made  Rs. 1,70,00,000/- mobile phones sales during the previous year. Same is shown in the GST  monthly returns and also discharged the tax liability on the same.

And  his income tax computation sheet provided to us is as under:

Now the question is, what will be the turnover for the purpose of filing the GST annual returns: 

1. 1,70,00,000 which is shown in GST Monthly returns.

2. 2,16,05,000 which is shown in Income tax returns.

3. any other amount? If so what is the relevant provisions of law

We have suggested as under:

Usually above confusion will come into our mind because of basic understanding over the definition of types of taxes

I.e. Direct Tax and Indirect Tax.

Many think that there is no requirement for reconciliation of Income tax computation sheet with the GST returns which we will file in monthly, quarterly, or yearly. Because direct and Indirect taxes are two different segment, there is no correlation.

In my view both direct and indirect taxes are inter-dependent each other. We have keep the same while making valuable business decisions.

Let us understand Mr. Baji Babu query with “aggregate turnover” definition

Sec 2(6) CGST Act defines aggregate turnover as under 

“aggregate turnover” means the 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;

T/O= all taxable supplies+ exempt supplies+ nil rated supplies+ non GST supplies+ exports Supplies+ transfers to distinct persons   ——–> has to be taken ALL INDIA basis.

Mobile phone sales ( Taxable supply)

Anyway Mr. Baji Babu shown the “ Moblie phone” sales  as taxable sales in GST

Rs. 1,70,00,000 will be forming part of GST turnover.

Capital gain on sale of securities: (Not a supply)

Sec 2(52) CGST Act Defines Goods as under:

goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;

Sec 2(52) kept the securities outside the definition of Goods, So sale of the same is not qualified as supply of goods and gain over the sale is the application of the money. So same is not forming part of turnover under GST.

Rs. 1,00,000 will be not be forming part of GST turnover

Gain on Settlement of forward contracts: (Not a supply)

Forward contract is a derivative as it derives its value from underlying assets.

As Per SCRA Securities includes derivative

Gain on settlement of forward contract is an application of money, application of the money not considered as turnover

Rs. 1,00,000 will be not be forming part of GST turnover

Dividend income (Not a supply)

Dividend we will receive on holding of securities, securities neither good nor service, the income which derived from holding the same considered as application of the money

So, application of the money not considered as turnover

Rs. 1,00,000 will be not be forming part of GST turnover 

Commission income: (Taxable Supply)

Sec 2(102) CGST Act Defines Service as under

“services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged

Commission receipt is covered under Sec.2(102) and also same is taxable supply. Mr. BaJi babu has to pay GST on the same even if same received from the business other than the GST Registration obtained (I.e. other than Mobile business for which he has taken GST registration)

Rs.5,000 will be forming part of GST turnover

Agricultural income: (Exempted Supply)

Sale of Agricultural produce is exempted under GST as same is covered under the Sec. 11 of CGST Act read with the relevant notifications.

Turnover definition includes the exempted supplies

Rs. 10,00,000 will be forming part of GST turnover 

Rental Income from Deemed let out property- (Not a Supply)

Rental income is supply under (either it may be taxable or exempted) GST.

In case of Deemed let out property, there is no supply of service as well as flow of consideration from others either in the monetary or non-monetary form.

2(31) “consideration” in relation to the supply of goods or services or both includes-

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Income tax Act 1961, create deeming fiction in case of deemed let out rental income to widen the tax base.

So, there is no supply of service for another and also no consideration in the case of deemed let out rental income. Same is not forming part of turnover under GST.

Rs. 1,00,000 will be not be forming part of GST turnover

Salary income: ( Schedule-III Supply)

Service provided by the employee to employer in the course of employment neither considered as supply of goods nor considered as supply of service. As same covered under the Schedule –III to Sec.7 of CGST Act.

Rs. 12,00,000 will be not be forming part of GST turnover

Interest receipt on FD and hand loan: (Exempted Supply)

“Interest income” is considered as supply of service. And same is covered under mega exemption list by way notification no.12/2017.

As Interest income is exempted supply, so same has to be included in the turnover

Rs. 20,00,000 will be forming part of GST turnover

Based on the above discussion we can conclude what turnover for filing of GST Act annual return:

 As Turnover is above the limit of Rs. 2Cr, it is suggested to file the GSTR-9. To avoid unnecessary litigation and disputes with GST department or adjudicating authority.

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Hope, the above content gives you some insights while making the valuable business decisions (or) giving suggestions. Above content is only the views & opinion of authors about referred subject. You can reach me at [email protected].