Section 35(5) commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit” whereas the relevant Rule 80(3) uses the expression “every registered person whose aggregate turnover during a financial year exceeds two crore rupees”. It must be noted that the word turnover has not been defined whereas the expressions “aggregate turnover” has been defined. One may note that the expression “turnover in State or turnover in Union territory” is also defined. In this backdrop the following understanding is relevant:
- Aggregate turnover is PAN based while turnover in a State/ UT is similarly worded except to the extent that turnover in a State/ UT is limited to a State;
- It is therefore, reasonable to interpret that the word turnover used in section 35(5) ought to be understood as aggregate turnover (PAN level).
- For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) uses the expression financial year; Therefore, in the absence of clarification from Government and to avoid any cases of default, it is reasonable to reckon the turnover limit prescribed for audit i.e., Rs. 2 crores for the whole of the financial year which would also include the first quarter of the financial year 2017-18.
Please also note that where the expression aggregate turnover (PAN level) is considered, please consider the taxable value under section 15 and not the amount as accounted in the books of accounts. E.g. do not ignore taxable value of stock transfers while examining this threshold limit.