Complete Details Composition Scheme under GST

Last Updated On: Oct. 22, 2020, 10:36 p.m.
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COMPOSITION SCHEME UNDER GST

Introduction:

The Concept of Composition scheme is not new, it was added in the Value Added Tax Regime.

For the relaxation of small traders, the concept of the Composition scheme was introduced. The trader is required to maintain books of accounts in comparison to normal GST Compliance requirements. Under this Composition scheme, the trader is no longer have to file their GST returns on a monthly basis.

They get an immune facility of filing the GST returns on a quarterly basis. This is a very easy and hassle-free compliance scheme for small taxpayers. Small taxpayers can get rid of tedious formalities of GST and can pay the tax at a fixed rate under the composition scheme.

 

NON-ELIGIBILITY OF THIS SCHEME:

Following people can not avail of the composition scheme even if they have an annual turnover of 1.5 crores:

  • A service provider other than restaurants.
  • E-Commerce operator.
  • Interstate supplier.
  • A regular taxable person or a non- resident taxable person.
  • Manufacturer of ice cream, tobacco, and pan masala.
  • A person engaged in making a supply of goods that are not leviable to tax under the GST Act.

 

RATES UNDER THE COMPOSITION SCHEME:

 

Type of Business  CGST  SGST     Total
Manufacturer and traders(goods) 0.5% 0.5% 1%
Restaurant not serving alcohol 2.5% 2.5% 5%
Other suppliers(traders and agent) 0.5% 0.5% 1%

   

 

 

Section 10 of the Central Goods and Services Tax Act (hereinafter referred to as the “CGST Act” 2017 provides a composition scheme for dealers having whose annual turnover below Rs. 1.5 crore and below Rs. 75 lakhs for dealers of special states which are Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Himachal Pradesh with the exception of Jammu and Kashmir and Uttarakhand whose threshold limit is Rs. 1 Crore.

Turnover of all the businesses registered with the same Permanent Account Number (PAN) is taken into account while calculating the turnover.

In case two or more registered persons are having the same Permanent Account Number, in such the above-mentioned case if a single registered person wants to opt for this scheme then he can only be eligible for this scheme if all such registered persons opt the scheme.

If one person opts for a normal tax scheme then others become ineligible to opt into this scheme. The composition scheme will lapse as soon as the aggregate turnover of the scheme holder during a financial year exceeds the specified limit that is 1.5 crore.

In this scheme, the supplier is required to issue a bill of supply instead of a tax invoice because they cannot charge tax from the buyers. This is due to the fact that they pay GST to the government on their own at a fixed rate owing to this they cannot avail of input tax credit also.

Furthermore, it is categorically provided under CGST Act that if a proper officer has reason to believe that an ineligible person has opted this scheme fraudulently and is taking the advantage of the same, the person in addition to any tax that may be payable by him, would also be liable to a penalty provided under section 73 and 74 of the CGST Act.

 

CONCLUSION:

This scheme is not beneficial for the large-scale traders as under this scheme inter-state transactions are not permitted. Thus, whoever wants to expand the business outside the state boundaries should refrain from opting for this scheme as it is an optional scheme.

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