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Turnover for Audit. (VAT)

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( Author )
06 January 2008

Sir,
Whether OMS purchase of capital asset is to be considered for calculating the limit of turnover of purchase for VAT audit. The Sale turnover is less than 40 lakhs. However the turnover of purchase is more than Rs 40 lakhs due to purchase of OMS capital asset (excavator). Please give your valuable opinion.

Kind Regards
Uday Bathia


CA. O.P. Agarwalla

( Expert )
07 January 2008

This is very interesting question. It all depends on the definitions given in the Act. Similar issue has been discussed in the Book "Audit under the AVAT, 2003-A practical approach" (published by Guwahati Branch of ICAI). As per the book:-
"Whether Gross turnover would mean a combined turnover of sales and purchase?
1.5.10 The definition of the term Gross Turnover as provided in section 2(23) is in two parts. Clause (i) covers Gross turnover for the purposes of levy of sales tax which is the entire amount of sales during the year. Clause (ii) covers Gross turnover for the purposes of levy of purchase tax which will include all purchases during the year. Now a question may arise what would constitute Gross Turnover for the purpose of ascertaining liability for audit.
1.5.11 Gross turnover has been defined in the Act for the limited purpose of computing sales and/or purchase tax. It has not been specifically defined for the purposes of section 62. In such circumstances, we have to fall back on the definition provided by Section 2(23) and derive therefrom a judicious conclusion.
1.5.12 Purchase tax is payable only in respect of certain purchase under section 12. The act, unlike in the case of Sales turnover, does not provide any deductions from Gross Turnover of purchase to arrive at taxable purchases.
1.5.13 It is therefore logical to conclude that the expression all purchases of goods means all purchases of goods on which purchase tax is leviable. Going by this interpretation of this term, Gross turnover for the purposes of Section 62 would be an aggregate of turnovers of all Sales and of Taxable Purchases."


R.V.RAO

( Expert )
07 January 2008

Gross Turnover of a dealer is the turnover of sales plus turnover of purchases under Section 12 of the VAT Act. Section 12 provides the circumstances where tax is leviable on purchase turnover. In those cases, instead of sale turnover of the goods, purchase turnover is taken into account while calculating the gross turnover.
so the aggregate for audit purpose is aggre. of both purchases and sales turnover.
source:www.WS.ori.nic.in
vat is a state act passed by each state. but the basic concepts are the same . that is why you find same definitions in assam vat given by our friend sri o.p. agarawala and myself from orissa vat act.
R.V.RAO


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