ISD Turnover: What Comes Out Before the Ratio Is Struck

ISD Turnover explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

The ratio in rule 39 is only as good as the turnover figure behind it. And the turnover an ISD uses is not aggregate turnover, not taxable turnover, and not the figure in the annual return. It is a purpose-built number with a specific set of deductions.

By the Explanation to rule 39, "turnover" in relation to a registered person supplying taxable goods as well as goods not taxable under the Act means the value of turnover reduced by any duty or tax levied under entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II. So a business with liquor or petroleum turnover includes that turnover in the base but strips out the excise, central sales tax and State VAT embedded in it — because those taxes are not part of the value being measured.

The starting point is wider than GST

Aggregate turnover under section 2(6) covers taxable supplies, exempt supplies, exports and inter-State supplies of persons with the same PAN, excluding CGST, SGST, UTGST, IGST and cess.

But the rule 39 turnover reaches beyond GST. It speaks of a registered person "engaged in the supply of taxable goods as well as goods not taxable under this Act" — that is, the five petroleum products outside GST and alcoholic liquor for human consumption.

Why include them at all? Because the ratio is measuring the size of each unit's business in a State, as a proxy for its consumption of common services. A refinery branch or a liquor manufacturing unit consumes head-office audit, legal and marketing services in proportion to its scale — and its scale is not visible in its GST turnover alone.

The computation, as the Handbook sets it out

And the Handbook explains the asymmetry: "To calculate the turnover under the clauses of this rule, aggregate turnover under GST is already excluding the taxes leviable under GST Act, and other turnover which is not under GST is including the taxes leviable under other Acts."

That single sentence is the reason the deductions exist. GST turnover arrives net of GST because section 2(6) says so. Non-GST turnover arrives gross of excise, CST and VAT, because nothing strips them out. The four deductions put both halves on the same footing — a value-of-goods basis, free of tax.

The four entries, and what each one is

• Entry 84 of List I — after the 101st Constitutional Amendment, the Union's power to levy duties of excise on petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and tobacco products.
• Entry 92A of List I — taxes on the sale or purchase of goods in the course of inter-State trade or commerce, i.e. central sales tax.
• Entry 51 of List II — duties of excise on alcoholic liquors for human consumption and on opium, Indian hemp and other narcotic drugs, manufactured or produced in the State.
• Entry 54 of List II — taxes on the sale of petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and alcoholic liquor for human consumption — the surviving State VAT.

The Handbook's table lists entry 54 twice, once for liquor and once for petroleum products, which is a useful reminder: both survive outside GST under the same entry, and both must come out.

A drafting note worth carrying. The reference to entry 92A was inserted by the CGST (Amendment) Act, 2018 with effect from 01.02.2019; before that, the explanation to the old section 20 referred only to entry 84.

What this means for particular businesses

A pure GST business. All turnover is GST turnover, already net of GST, and none of the four deductions applies. The ISD turnover is effectively the State-wise turnover as reported.

An oil marketing company. Branch turnover includes petrol and diesel sales carrying State VAT and, upstream, central excise. Both come out. Failing to strip them inflates that branch's ratio and over-distributes credit to it — which is precisely the situation section 21 treats as excess distribution recoverable from the recipient. Excess distribution and its recovery →

A liquor manufacturer or distributor. State excise under entry 51 and State VAT under entry 54 both come out.

An exporter branch. Exports are within aggregate turnover and carry no GST, so they enter at value — which correctly reflects the scale of the branch.

The recurring practical questions

Which State's turnover? The rule says turnover in a State or turnover in a Union territory of that recipient — so the figure is per registration, not entity-wide.

Turnover of which period? The relevant period — the preceding financial year, or the last quarter for which details of all recipients are available. The relevant period and the formula →

Only operational units? The rule refers to recipients "which are operational in the current year, during the said relevant period", so a unit that has ceased operations does not remain in the denominator indefinitely.

Where does the figure come from? In practice, from the same State-wise books that support each registration's returns. The discipline worth adopting is to freeze the ratio once a year, when the preceding year's figures close, and document it — because the ratio drives twelve months of GSTR-6 and is the first thing an officer will test.

Key takeaways

• ISD turnover is not aggregate turnover — it includes non-GST turnover such as liquor and petroleum.
• Four deductions apply: entry 84 (excise), entry 92A (CST), entry 51 (State excise on liquor) and entry 54 (State VAT on liquor and petroleum).
• The reason is symmetry — GST turnover is already net of GST, non-GST turnover is gross of its own taxes.
• The entry 92A reference was inserted by the CGST (Amendment) Act, 2018 w.e.f. 01.02.2019.
• Turnover is measured per State or UT registration, for the relevant period, for units operational in the current year.
• Failing to strip the levies inflates a branch's ratio and creates an excess distribution exposure under section 21.
• Freeze and document the ratio annually — it drives twelve months of returns.

Read next

• Rule 39: The Turnover Formula and the Relevant Period
• How an ISD Converts Tax Heads: IGST, CGST, SGST and UTGST
• Section 21: Excess Distribution, Recovery and the Two Penalties

Disclaimer: Positions stated as on 5 September 2026, based on section 20 of the CGST Act, 2017, rule 39 of the CGST Rules, 2017 and entries 84 and 92A of List I and entries 51 and 54 of List II of the Seventh Schedule to the Constitution, as reproduced in the ICAI Handbook on Input Service Distributor under GST (2nd edition, September 2025).