COMPOSITION SCHEME UNDER GST LAW
Under the proposed GST regime, composition scheme is also introduced as a part of “ease of doing business” to promote small enterprises. There are a lot of compliances to be followed under the normal GST scheme such as filing of monthly returns and maintaining various records. By opting the composition scheme, a person can be relieved save himself from all the extensive provisions of GST law.
This option is available to the registered taxable person whose supplies are restricted to a particular state. In other words, a person affecting Inter-State supplies (outward) cannot opt for this scheme.
- ELIGIBILITY: Suppliers whose aggregate turnover in the preceding financial year does not exceed Rs.75 lakhs.
Provided that aggregate turnover shall be Rs.50 Lakhs in Himachal Pradesh and North Eastern States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura)
Aggregate Turnover = Value of all Supplies (Taxable + Non-taxable + Exempted) of a person having the same PAN.
- TAX RATE:
Manufacturers, other than manufacturers of notified goods:- 2%
Restaurant Sector:- 5%
Any Other Supplier:- 1%
- RETURNS: Taxpayer will be required to file the following:
Quarterly Returns in form GSTR-4 (instead of monthly returns) and
Annual Return in form GSTR-9A.
- RESTRICTIONS AND CONDITIONS:
- Person exercising the option is neither a casual taxable person nor a non-resident taxable person.
- The goods held in stock by him on 30.06.17 , have not been purchased through inter-state transaction.
- The goods held in stock by him have not been purchased from an unregistered person and where purchased, he pays tax under sec 9(4) i.e.reverse charge.
- He shall mention the words “composition taxable person not eligible to collect tax on supplies” at the top of the bill of supply issued by him.
- He shall pay tax under Reverse Charge on inward supply of goods or services or both received from un-registered persons.
- Composition Dealer is not allowed to take input tax credit of GST paid for the inward supplies.
- Composition Dealer shall not be allowed to issue tax invoice for any outward supplies.
(Please Note: Any registered person who is making inward supplies from a composition dealer will not be allowed to take input tax credit on such supplies.)
- Composition Dealer is barred from carrying out inter-state outward supplies i.e. limited territory for business.
- NOT APPLICABILITY:
- Suppliers supplying Goods through E-commerce are not allowed to opt for Composition Scheme.
- Composition Scheme cannot be opted by Service Providers as services have been kept out of this except the Restaurant Sector.
- Registered Person shall not be allowed to opt for Composition Scheme if such person is a manufacturer of the goods which includes Ice Cream and other edible ice, Pan Masala and Tobacco.
Small and Medium Enterprises may find it difficult to deal with requirements of the GST Law due to lack of knowledge and expertise. Therefore, in order to mitigate hardships on them and to make compliance easier for them this scheme is introduced.
This scheme is beneficial for very small businesses who are dealing in goods only but the small service providers are kept out of this scheme and this will not provide any relief to them. In the recent amendments, GST Council has approved only Restaurant Sector services to be part of the composition scheme in order to unlock the potential of food and beverages service sector.
For any query, please feel free to contact. We would be opportune to respond.