Composition
Scheme Under GST
This blog will provide
you the complete details about Composition Levy, also known as composition
Scheme under GST (Goods and Service Tax). It is a relaxed scheme under GST
Regime in which small business can find an ease in terms of compliance. There
are simple quarterly and annual returns, no requirement of audit, no ITC (input
tax credit) compliance, low tax rates etc.
Initially Composition
levy was basically for good's manufacturers & traders and there was only
one exception that was Restaurants Service (in legal term defined as; supply of
food or any other article for human consumption or drinks excluding alcoholic
liquor). But now it is available to Service-Providers w.e.f 1st April
2019.
The details under this
blog are derived from Sec.10 of GST Act read with composition rules and various
notifications.
Benefits
of Composition Levy
Composition Levy is a
easy compliance scheme under GST basically drafted in consideration to small
business persons. There are many benefits of Composition levy and few of them
are mentioned below :
1) Simple return - 4
quarterly return (CMP 08) and 1 annual return (GST 9A)
2) Less burden to
maintain various books & records.
3) Low rate of Tax
4) No bothering of ITC
(Input Tax Credit).
5) Easy to operate
business without many employees.
6) No need to collect
any tax from purchaser or Recipient.
7) No need for GST
Audit.
Restrictions
under Composition Levy
1) Cannot Avail Input
Tax Credit (ITC).
2) Cannot provide/forward
tax credit to purchaser or Recipient.
3) Cannot issue Invoice
(details below).
4) Non compliance will
make them ineligible for the scheme.
Return
filing
Under composition levy the return filing compliance
is very simple, & less in number. your have to file quarterly return in "CMP
08" by '18th of the month following the quarter" and an annual return
in "GSTR 9A/GSTR 4" by '31st of March of the Assessment Year (A.Y.)
following the Financial Year (F.Y.)'.
Currently for F.Y. 2018-19 annual return
available is GSTR 9A & GSTR 4 is currently not available.
Rate
of Tax
Service along with goods
As per Sec.10 of GST
Act, a person who opt composition scheme may provide service of 10% of its
turnover or ₹ 5,00,000 (Rupees Five Lakhs) which ever is higher. Exceeding this
limit will make the person ineligible for this scheme and his transition will
to done to the regular scheme/levy forthwith.
- Rate of tax will same a manufacturers & traders.
Eligibility
Now Composition levy is
available to trader, manufacturer and service providers (w.e.f 01/04/2019). A
person registered under this scheme cannot issue invoice, in its place has
issue "Bill of Supply". But for service providers there are certain
additional conditions, so to make it more understandable we will discussing
them one by one.
For
Traders and Manufactures
As per the Notification No. 14/2019 - Central Tax dt. 7th March 2019 of CBIC, a person whose aggregate
turnover in the preceding financial year (F.Y.) did not exceed ₹ 1,50,00,000
(Rupees One Crore Fifty Lakhs) may opt for composition scheme. The limit for
the following states is ₹ 75,00,000 (Rupees Seventy Fifty Lakhs):
(i)
Arunachal Pradesh
(ii)
Manipur
(iii)
Meghalaya
(IV)
Mizoram
(v)
Nagaland
(vi) Sikkim
(vii)
Tripura
(Viii) Uttarakhand
Here, for the calculation of "Aggregate Turnover" the meaning shall be driven from Sec.2 Clause (6) of the act.
Aggregate Turnover includes :
1) All taxable sales/supplies.
2) Excluding RCM (Reverse charge mechanism) purchases/inwards.
3) Exempt sales/supplies.
1) All taxable sales/supplies.
2) Excluding RCM (Reverse charge mechanism) purchases/inwards.
3) Exempt sales/supplies.
4) Exports.
5) Inter state sales/supplies.
The following are the
conditions :-
1. He is not a
service provider.
2. He is not
supplying goods which are not taxable under GST.
3. He is not
carrying out inter-state sales/supplies.
4. He is not
supplying goods though E-Commerce Operates like Amazon, Flipkart etc., required
to Collect TCS (tax collected at source).
5. He is not a
manufacturer of goods as notified by council.
6. He is not a
casual taxable person or a non-resident person.
7. He has not held
stock from : Inter-state purchase, imports, Other state branches, Purchases
from Unregistered person or RCM.
8. He is not
a ISD (Input Service Distributor).
9. He is not
a Tax Collector/Tax Deductor.
10. He has to pay tax
like regular levy in case of purchase from Unregistered Person.
11. He has to mention
the word "Composition taxable Person" on every notice, signboard and
very other place.
12. He has to mention
the word "Composition taxable person not eligible to collect tax on
supplies" at the top of 'Bill of Supply'.
For
Service Provider
A person whose aggregate
turnover in the preceding financial year (F.Y.) did not exceed ₹ 50,00,000
(Rupees Fifty Lakhs) may opt for composition scheme.
- Here for calculating aggregate turnover there is a exception, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.
The following are the conditions :-
1. He is a registered person under Regular Levy GST.
2. He is not
eligible to pay tax under sub-section (1) of section 10.
3. He is not
engaged in supplies which are not taxable under GST.
4. He is not
carrying out inter-state supplies.
5. He is not
a casual taxable person or a non-resident person.
6. He is not
engaged in supplies though E-Commerce Operates like Amazon, Flipkart etc.,
required to Collect TCS (tax collected as source).
7. He is not
engaged in supplies as notified by council.
8. He is not a Tax
Collector/Tax Deductor.
9. Who all are
registered under same PAN will be levied under Composition scheme, if even
applied by one.
10. He has to mention
the word "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" at the top of 'Bill of Supply'.
This is complied details about the Composition Levy. For any suggestion, comment & query please comment in the comment box below.
Disclaimer :
The above blog is purely
for educational and guidance purpose. It's just the reflection of the
author's personal experience and judgment. The author has just provided the
general information & understanding and its not at all an alternative of
any legal advice or practitioner. It has no connection with the websites
mentioned in its contents. The content stated in the blog should be used by the
reader at his own discretion and sole responsibility. The content of the blog
can be only used for any other document, write-up, article, blog and any
written or printed material whether on paper or digitally in any form, with the
prior permission of the author.
