Total turnover

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Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2013 Whether VAT Collected is a part of turnover for the purpose of Section 44AD and Section 44AB?
Suppose a Business Man has a turnover of Rs - 95,00,000/- and he have collected Rs 10,00,000/- as VAT. Whether the provisions of 44AB is applicable on him?

Again Suppose a Business Man has a turnover of Rs - 50,00,000/- and he have collected Rs 5,00,000/- as VAT. Whether he wll have to take his gross turnover as 50,00,000/- or 55,00,000/- for the purpose of Sec- 44AD?

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Gaurav Garg

Gaurav Garg (Expert)
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29 October 2013 Firstly amount of vat is not taken as a part of sale because output vat collected from customer is not a income of assessee , it is a income of state govt and therefore it is shown on liabilities side or assets side as the case maybe , it is not part of sale

Therefore assessee is not liable for tax audit

Secondly as per finance act 2012 section 44AD has amended now ab assessee can file return under section 44AD if its turnover is less than 1 crore and not 60 lakhs

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Querist : Anonymous

Querist : Anonymous (Querist)

30 October 2013 Thank you Mr. Gaurav Garg. The last part of my question is stil incomplite. Whether the said businessman will calculate his Total turnover as 50,00,000/- or 55,00,000/- for the purpose of Section 44AD.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Great question! Here’s the detailed clarification regarding **turnover and VAT** for **Sections 44AD and 44AB**:

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### 1. **Is VAT collected part of turnover for Sections 44AD/44AB?**

* **No**, VAT collected is **not part of turnover**.
* Reason: VAT is a **pass-through tax** collected on behalf of the government and **does not belong to the assessee**.
* Therefore, for income tax purposes, VAT is **excluded from turnover**.

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### 2. **Turnover for Section 44AD**

* Turnover means the **gross receipts or sales** excluding VAT.
* So, if the businessman’s sales are Rs. 50,00,000 and VAT collected is Rs. 5,00,000, then:

**Turnover for Section 44AD = Rs. 50,00,000 (excluding VAT)**

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### 3. **Applicability of Section 44AB (Tax Audit)**

* Tax audit under Section 44AB is applicable if the turnover exceeds prescribed limits.
* Since VAT is excluded, the **turnover is considered without VAT**.
* So in your example, if turnover is Rs. 95,00,000 + VAT Rs. 10,00,000:

* For tax audit, turnover considered = Rs. 95,00,000 only, not Rs. 1,05,00,000.

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### 4. **Summary**

| Scenario | Turnover for Income Tax (Excluding VAT) | Applicability of Section 44AB/44AD |
| ------------------------------- | --------------------------------------- | ---------------------------------- |
| Business with Rs. 95L + VAT 10L | Rs. 95L | Based on Rs. 95L |
| Business with Rs. 50L + VAT 5L | Rs. 50L | Based on Rs. 50L |

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### Additional Notes:

* This treatment is consistent with the CBDT guidelines and judicial precedents.
* Always consider **sales value exclusive of VAT** for turnover calculation under income tax laws.

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If you want, I can also help with how to document this treatment in your accounts or filing. Would you like that?

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