Composition scheme is a simplified scheme for the small taxpayers under GST. According to this scheme, they can get rid of tedious GST formalities. As per this scheme they are required to pay fixed amount of tax. This scheme can be opted by taxpayer having turnover less than Rs. 1.5 Cr.
The composition scheme for services was introduced via CGST (Amendment) Act, 2018 according to which a composition dealer can also supply services of value not exceeding 10% of turnover or Rs. 5 Lakh, whichever is higher.
On 07.03.2019, CBIC issued a notification No. 02/2019-Central Tax (Rate) regarding composition scheme for supplier of services with a tax rate of 6% having annual turnover in preceding year upto Rs. 50 Lakhs.
This scheme is made effective from 01.04.2019.
Description of Supply:
First supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees made on or after the 1st day of April in any financial year, by a registered person.
Now the Phrase “first supplies of goods or services or both” is defined as for the purpose of determining eligibility as including the supplies from the 1st day of April of a financial year to the date from which he becomes liable for registration under the said Act i.e. after exceeding threshold limit of Rs. 20 Lakh, an unregistered service provider have to get itself registered under the GST act & can opt for Composition scheme. The moment his annual turnover exceeds Rs. 50 Lakh then he is required to opt out from the composition scheme.
For the purpose of determination of tax payable, “first supplies of goods or services or both” is defined as not including the supplies from the 1st day of April of a financial year to the date from which he becomes liable for registration under the Act. For example, after getting registered (after crossing Rs. 20 Lakh Limit), till reaching the Maximum Limit of Rs. 50 Lakh, he will pay GST at the rate of 6% on the amount of Rs. 30 Lakh (Rs. 50 Lakh – Rs. 20 Lakh).
Conditions for availing composition scheme:
• Aggregate turnover in the preceding financial year was fifty lakh rupees or below.
• Not eligible to pay tax under S. 10(1) of GST Act.
• Not engaged in making any supply which is not leviable to tax.
• Not engaged in making any inter-State outward supply.
• Neither a casual taxable person nor a non-resident taxable person.
• Not engaged in making any supply through an electronic commerce operator who is required to collect tax at source u/s 52 of the GST Act.
• Not engaged in making supplies of the goods, the description of which is specified in column (3) of the Annexure below and falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said annexure. (Ice cream and other edible ice, whether or not containing cocoa, Pan masala, All goods, i.e. Tobacco and manufactured tobacco substitutes)
The notification further provide that where more than one registered persons are having the same PAN, tax on supplies by all such registered persons is paid at the rate of 6%.
The registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax meaning thereby a supplier cannot collect tax from his customers & accordingly ITC is not allowed.
The registered person shall issue, instead of tax invoice, a bill of supply as referred to in S. 31(3)(c) of the GST Act with particulars as prescribed in rule 49 of Central Goods and Services Tax Rules meaning thereby only Bill of supply will be issued by the supplier to his customer instead of a tax invoice.
The registered person shall mention the following words at the top of the bill of supply, namely: - ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.
The registered person opting to pay tax under composition scheme shall be liable to pay tax at the rate of 6% on all outward supplies specified in column (1) notwithstanding any other notification issued with regard to intra state supply of goods or service or both, except supply of alcoholic liquor and exempt supply.
The registered person opting to pay tax at the rate of 6% under this notification shall be liable to pay tax on inward supplies on which he is liable to pay tax under reverse charge mechanism at the applicable rates.