Saluja Goyal & Company, Chartered Accountants - Noida

Introduction

GST Composition Scheme is for small tax payer under GST which is governed by Section 10 of CGST Act and Rule 3 to Rule 7 of CGST Rules, 2017.Composition Scheme is a simple and easy scheme for small tax payer which gives privileges for simpler return filings and grant some relaxation in documentation and record keeping.

This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.0 crore (This limit changing time to time by government).

Who can Opt or not opt for Composition Scheme?

WHO CAN OPT

• A taxpayer whose turnover of Goods is below Rs 1.0 crore* can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.
• Service Providers can opt into the Composition Tax Scheme, and the Government has set the threshold turnover for service providers at Rs. 50 lakhs to be eligible for this scheme.

WHO CANNOT OPT?

• Manufacturer of ice cream, pan masala, or tobacco
• A person making inter-state supplies
• A casual taxable person or a non-resident taxable person
• Businesses which supply goods through an e-commerce operator

What are rates of taxes under Composition Scheme?

• Manufacturer and Traders of Goods: 1%
• Restaurant not serving Alcohol: 5%
• Other Service Provider: 6%

General Facts about Composition Scheme?

• No Input Tax Credit can be claimed by a dealer opting for composition scheme.
• The dealer cannot supply GST exempted goods.
• The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism.
• If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme..
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
• The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
•  A manufacturer or trader can now also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher.
• This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme.
• Dealer is restricted from effecting inter-State outward supplies.
• Dealer opting to pay tax under the composition scheme is prohibited from collecting tax on the outward supplies.