Understanding Annual Aggregate Turnover (AATO) Under GST & How to Calculate It

Introduction

In the realm of Goods and Services Tax (GST) in India, the concept of “Annual Aggregate Turnover” (AATO) holds significant importance. It serves as a crucial benchmark for determining various aspects of GST compliance, including registration liability, eligibility for the Composition Scheme, and the applicability of certain other provisions like e-invoicing. Understanding what constitutes AATO and how to calculate it accurately is essential for every business operating under the GST regime. This detailed article will break down the definition of AATO and provide a step-by-step guide on how to calculate it.

What is Annual Aggregate Turnover (AATO) Under GST?

The term “Annual Aggregate Turnover” is defined under Section 2(6) of the Central Goods and Services Tax (CGST) Act, 2017. It refers to the total value of all taxable supplies, exempt supplies, exports of goods or services or both, and inter-State supplies of persons having the same Permanent Account Number (PAN), to be computed on an all-India basis but excluding the value of inward supplies on which tax is payable under reverse charge.

Let’s break down this definition to understand its key components:

• Total Value: This implies that the turnover is calculated based on the value of the supplies, not just the profit or the cost.
• Taxable Supplies: These are supplies of goods or services or both that are subject to GST.
• Exempt Supplies: These are supplies of goods or services or both that are specifically exempted from GST under the GST Act. This includes supplies with a nil rate of tax.
• Exports of Goods or Services or Both: Supplies of goods or services made to a place outside India are included in the AATO.
• Inter-State Supplies: Supplies of goods or services made from one state to another are also part of the aggregate turnover.
• Persons having the same PAN: If you have multiple GST registrations under the same PAN (e.g., in different states), the turnover of all such registrations is clubbed together to calculate the AATO for the entire business entity.
• All-India Basis: The calculation is done for all your business operations across India, regardless of the state of registration.
• Excluding Inward Supplies under Reverse Charge: The value of goods or services you purchase on which you are liable to pay GST under the reverse charge mechanism is excluded from your AATO.

What is Included in the Calculation of AATO?

To reiterate, the following components are included when calculating your Annual Aggregate Turnover:

• Value of all Taxable Supplies: This includes the invoice value of all goods and services on which GST is applicable.
• Value of all Exempt Supplies: This includes the invoice value of all goods and services that are exempt from GST or have a nil GST rate.
• Value of all Export Supplies: This includes the invoice value of all goods and services exported out of India.
• Value of all Inter-State Supplies: This includes the invoice value of all goods and services supplied from one state to another.

What is Excluded from the Calculation of AATO?

The following components are specifically excluded from the calculation of your Annual Aggregate Turnover:

• Value of Inward Supplies on which Tax is Payable under Reverse Charge: This is the value of purchases for which you are liable to pay GST directly to the government.
• Central Tax (CGST), State Tax (SGST), Union Territory Tax (UTGST), Integrated Tax (IGST), and Cess: The amount of GST itself that you collect or pay is not included in your turnover.

Why is Calculating AATO Important?

Accurately calculating your Annual Aggregate Turnover is crucial for several reasons:

• Determining GST Registration Liability: The primary use of AATO is to determine if your business is liable for GST registration. If your AATO exceeds the prescribed threshold (currently ₹40 lakhs for goods and ₹20 lakhs for services in most states), you are required to register for GST.
• Eligibility for Composition Scheme: Small taxpayers with an AATO of up to ₹1.5 crore (₹75 lakhs for special category states) in the preceding financial year can opt for the Composition Scheme, which offers a simplified tax compliance regime.
• Applicability of E-invoicing: The government has made e-invoicing mandatory for certain classes of taxpayers based on their AATO. Exceeding the specified AATO threshold necessitates the generation of e-invoices.
• Thresholds for Other Compliances: AATO might be a determining factor for the applicability of other GST provisions and compliance requirements in the future.

How to Calculate Annual Aggregate Turnover (AATO): A Step-by-Step Guide

Calculating your AATO involves considering all your business activities under the same PAN across India for a financial year (from April 1st to March 31st). Here’s a step-by-step approach:

Step 1: Calculate the Total Value of all Taxable Supplies

Sum up the invoice value of all goods and services you supplied that are subject to GST during the financial year.

Step 2: Calculate the Total Value of all Exempt Supplies

Sum up the invoice value of all goods and services you supplied that are exempt from GST or have a nil GST rate during the financial year.

Step 3: Calculate the Total Value of all Export Supplies

Sum up the invoice value of all goods and services you exported out of India during the financial year.

Step 4: Calculate the Total Value of all Inter-State Supplies

Sum up the invoice value of all goods and services you supplied from one state to another within India during the financial year.

Step 5: Add the Values from Steps 1 to 4

Add the total values calculated in the previous steps. This will give you the gross aggregate turnover.

Step 6: Deduct the Value of Inward Supplies Under Reverse Charge (Optional)

If you have any inward supplies on which you paid tax under the reverse charge mechanism, you can exclude their value from the sum obtained in Step 5.

Step 7: Deduct the Amount of GST Itself (Optional)

The amount of CGST, SGST/UTGST, IGST, and Cess included in the invoice values should also be deducted to arrive at the AATO. However, often the gross turnover (before deducting GST) is used for determining registration liability and Composition Scheme eligibility. It’s best to refer to the specific context or rule to understand if this deduction is required for that particular purpose.

Example of AATO Calculation

Let’s consider a business with the following transactions in a financial year:

• Taxable Supplies (within the state): ₹35 lakhs
• Exempt Supplies: ₹10 lakhs
• Export Supplies: ₹5 lakhs
• Inter-State Supplies: ₹12 lakhs
• Inward Supplies under Reverse Charge: ₹3 lakhs
• Total GST collected and paid: ₹5 lakhs

Calculation:
Value of Taxable Supplies: ₹35 lakhs
Value of Exempt Supplies: ₹10 lakhs
Value of Export Supplies: ₹5 lakhs
Value of Inter-State Supplies: ₹12 lakhs
Sum of above: ₹35 + ₹10 + ₹5 + ₹12 = ₹62 lakhs
Value of Inward Supplies under Reverse Charge (Excluded): ₹3 lakhs
GST Amount (Excluded): ₹5 lakhs
In this example, the Annual Aggregate Turnover (AATO) would be ₹62 lakhs. For the purpose of determining registration liability and Composition Scheme eligibility, the value of inward supplies under reverse charge and the GST amount itself are generally not deducted from the gross turnover.

Points to Remember

• AATO is calculated on an all-India basis for all entities under the same PAN.
• The calculation is based on the turnover in a financial year (April to March).
• For new businesses, the AATO is estimated for the current financial year to determine registration liability.
• It’s crucial to maintain accurate records of all your supplies to calculate AATO correctly.
• Always refer to the latest GST rules and regulations for any specific clarifications or changes in the definition or calculation of AATO.

Conclusion

Understanding and accurately calculating your Annual Aggregate Turnover (AATO) is a fundamental aspect of GST compliance. It determines your obligations under the GST law and impacts crucial decisions like registration and opting for the Composition Scheme. By carefully considering all the inclusions and exclusions and following the step-by-step calculation process, businesses can ensure they are compliant with the GST regulations and avoid potential penalties. Always stay updated with the latest notifications and seek professional advice when in doubt.