GST COMPOSITION SCHEME
Hey, an easy scheme is introduced under GST Act for small taxpayers. Let us have a deep knowledge of it. For more knowledge of GST, please refer our other blogs: – What is GST, Advantages and Disadvantages of GST,Type of GST taxes, Exemption list etc.
Small taxpayers can get rid of complex GST formalities and pay GST at a fixed rate of turnover. Composition Scheme is a simple and easy scheme under GST for taxpayers.
This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore.
Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.
The following people cannot opt for the scheme:
- Taxpayer supplying exempt supplies.
- Supplier of services other than restaurant related services
- Manufacturer of ice cream, pan masala, or tobacco
- Casual taxable person or a non-resident taxable person
- Businesses which supply goods through an e-commerce operator
The following conditions must be satisfied in order to opt for composition scheme:
- No Input Tax Credit can be claimed by a dealer opting for composition scheme
- The taxpayer cannot make any inter-state supply of goods.
- The dealer cannot supply GST exempted goods
- Taxpayer has to pay tax at normal rates for transactions under 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.
To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal.
Hey, For more basics of GST refer our other blogs by clicking here: –
- What is GST?
- Advantages and Disadvantages of GST?
- E-Way bill?
- Exemption List under GST?
- Types of GST Taxes?
This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme.
A composition dealer cannot issue tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket.
Hence, the dealer has to issue a Bill of Supply.
The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.
A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year.
Also, note that a dealer registered under composition scheme is not required to maintain detailed records.
Rate of Tax
The following are the advantages of registering under composition scheme:
- Lesser compliance (returns, maintaining books of record, issuance of invoices)
- Limited tax liability
- High liquidity as taxes are at a lower rate
Let us now see the disadvantages of registering under GST composition scheme:
- A limited territory of business. The dealer is barred from carrying out inter-state transactions
- No Input Tax Credit available to composition dealers
- The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.
Forms used in composition scheme
Further more knowledge on how to fill returns regarding GST, please refer our other blogs.
In case you are confused about GST, feel free to consult the GST experts at ItsLyf. Also contact for comprehensive assistance with GST Registration and GST Return Filing by email us at email@example.com
Geetika Goyal (Team ItsLyf)
GST COMPOSITION SCHEME
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