Amended Definition of TURNOVER u/s 2(91)

Hi Shashwat, here’s a detailed explanation on the amended definition of “Turnover” under Section 2(91) of the Companies Act, 2013 based on your queries:

1. What to include in “Gross Amount of Revenue”? Should tax element be included?

Turnover means the gross amount of revenue recognized in the Profit & Loss account from sale, supply or distribution of goods or services.
“Gross” means before any deduction of expenses like GST, sales tax, or discounts.
However, the tax collected on sales (like GST or VAT) is generally excluded from turnover since this is not revenue earned by the company but collected on behalf of the government.
Therefore, turnover usually excludes GST and other indirect taxes but includes the value of sales before any deductions for returns, discounts, or allowances.
The company’s accounting policy and audit standards generally require excluding GST from revenue.

2. Should Other Income be included for computing revenue/turnover?

No. Other income like interest income, dividend income, profit on sale of assets, or rent income is not part of turnover.
Turnover refers specifically to revenue from the company’s principal business activities — sale of goods or services.
Other income is reported separately under “Other Income” in the P&L.

3. Should turnover be computed on Cash basis or Accrual basis?

As per Accounting Standards and Companies Act, turnover is recognized on accrual basis.
This means revenue is recognized when goods are sold or services rendered, irrespective of actual receipt of cash.
So, turnover includes all sales billed during the year, even if payment is yet to be received.

4. Is “Income from Operations” in the Balance Sheet inclusive or exclusive of tax?

Note: “Income from Operations” is shown in the Profit & Loss Statement (not the Balance Sheet).
It generally refers to net sales or revenue after adjusting for returns and trade discounts but before deducting indirect taxes like GST or VAT.
However, in practice, Income from Operations is reported exclusive of GST or sales tax because such taxes are not revenue but liabilities payable to the government.
So, it excludes taxes collected on behalf of government.

Summary:

Query	What to Include/Exclude	Basis
Gross amount of revenue	Include sales value excluding GST/sales tax	Exclude taxes, include discounts/returns adjustments
Other income	Exclude other income from turnover	Separate head in P&L
Basis for turnover recognition	Accrual basis	Accounting standard
Income from operations (P&L)	Exclude indirect taxes like GST	Net of taxes