TaxTMI 
TaxTMI 
AUDIT OF ACCOUNTS
26 Jun 2010 
3 Replies 
1748 Views Asked by
Inclusion of VAT in turnover may trigger mandatory tax audit under section 44AB if turnover exceeds threshold.
Whether VAT collected is part of turnover for a mandatory tax audit under Section 44AB is disputed: ICAI guidance and one view exclude VAT, while alternative judicial and Section 145A-based reasoning treat sales tax/VAT as trading receipt included in turnover. Practically, if turnover inclusive of VAT exceeds the statutory threshold an audit should be obtained to avoid disallowance under section 40(a)(ia) or penalties; purchases generally are not treated as turnover though tribunal views differ. (AI Summary)
Whether VAT collected is part of turnover for a mandatory tax audit under Section 44AB is disputed: ICAI guidance and one view exclude VAT, while alternative judicial and Section 145A-based reasoning treat sales tax/VAT as trading receipt included in turnover. Practically, if turnover inclusive of VAT exceeds the statutory threshold an audit should be obtained to avoid disallowance under section 40(a)(ia) or penalties; purchases generally are not treated as turnover though tribunal views differ. (AI Summary)
Pls. clarify, whether sales tax/vat is added to total turnover for calculating the limit of gross receipt of Rs. 40 lacs. For example assume total sales excluding vat is Rs. 3900000/-. VAT is Rs. 150000/-. The assessee shows sales net of sales tax in trading account i.e.at Rs. 3900000/-. Is he required to get the accounts audited.