To Reduce Burden of More Compliance of Law and Regulation under Goods and Service Tax Composition Scheme was introduced by Government of India for Small Businesses. It helps small businessmen to concentrate more on business rather than Compliance of Goods and Service Tax. Composition Scheme is defined under section 10 of Central Goods and Service Tax Act (CGST Act).

 

Persons (Tax Payer) eligible for Opting in for Composition Scheme

A taxpayer whose turnover is below Rs 1.5 crores (75 Lakhs in case of North – Eastern States and Himachal Pradesh) can opt for Composition Scheme. Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.

 

Persons (Tax Payer) not Eligible for Opting in for Composition Scheme

·         Taxpayer who supplies exempt supplies.

·         Supplier of services other than restaurant related services.

·         Manufacturer of Ice Cream, Pan Masala, or tobacco.

·         Any Person registered as Casual taxable person or a Non-resident taxable person.

·         Any Person which supplies goods through an e-commerce operator.

 

Conditions or Restriction to Tax Payers to Opt in for Composition Scheme

·         Any Tax Payer who is registered under composition Scheme can not make Inter State Supply.

·         Any Tax Payer who is registered under composition Scheme can not avail Input of Tax on Inward Supplies.

·         The dealer can not supply GST exempted goods

·         Any inward supplies on which Liabilities of Goods and Service Tax arises to Composition Scheme Dealer then Tax Payer who is registered under composition scheme has to pay tax at normal tax rates for such transactions. 

·         Composition Scheme is PAN Number Based scheme   Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover. 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.

·         Suppliers of Goods can Provide Service of up to Rs. 5 Lakh under Composition Scheme.

·         Every Taxpayer who is registered under Composition Scheme taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.

 

Process to Opt in or Opt Out for Composition Scheme

Tax Payer who wants to file to opt in for Composition has to file form GST CMP – 02 on Online Portal of GST. Tax Payer who opted in Composition under GST Regime before 31st March 2018 (which is last date to opt in Composition Scheme under GST Regime)   have to file form ITC – 03 within 60 Days of commencement of Financial Year 2018-19 (i.e. Before 30th May 2018) to declare the Reversal of Input Tax Credit on Input Goods or Capital Goods or on Semi Finished Goods or on Finished Goods.

Beginning of every Financial Year Tax Payer wanting to opt for Composition Scheme has to give intimidation to government.

 

GST Return forms and Due Date of GST Return for Tax Payers who Opt in for Composition Scheme

Any Tax Payer who is Opt in for Composition Scheme is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter.

Any Tax Payer who is Opt in for Composition Scheme is required to file an annual return GSTR-9A has to be filed by 31st December of next financial year.

Penalty for Late Filing of GSTR 4 by any Tax Payer who is Opt in for Composition Scheme is Rs. 50 per Day for late filing of GSTR 4 for failure continues.

Any Tax Payer who is registered under composition scheme is not required to maintain detailed records.

 

Invoice by any Tax Payer who opt in for Composition Scheme

Tax Payer who Opt in for Composition Scheme Can not issue Tax Invoice because a any Person who opt in for Composition Scheme can not charge or recover Goods and Service Tax from Customers but such Tax Payer have to pay Tax from own pocket.  Tax Payer who Opt in for Composition Scheme have to issue Bill of Supply for Supply of Goods or permitted supply of Services and have mention on the Top of Bill of Supply that “Composition Taxable Person, Not Eligible to Collect Tax on Supplies. 

 

Payment of Goods and Service Tax by Any Person who opt in for Composition Scheme

·         Goods and Service Tax on Supplies of Goods and Permitted Supply of Service.     

·         Any Inward Supply of Goods and Supply of Service on which Tax Liability arise on Receiver of Goods and Service under Reverse Charge Mechanism.     

·         Any Purchase from Unregistered Supplier.

 

Advantage of Opting in For Composition Scheme to Tax Payer

·         Any Tax Payer who is registered under composition Scheme required to file Quarterly Return Form GSTR 4 rather than Monthly Returns (GSTR 1, GSTR 2 and GSTR 3B) like Regular Tax Payer have to file.

·         Less Compliance relating to Maintenance of Books of Account and Maintenance of Records.

·         Any Tax Payer who is registered under composition Scheme not required to issue Tax Invoice. But it is enough to issue Bill of Supply.

·         Lower Rate of Tax Liability on Any Tax Payer who is registered under composition Scheme which Reduces Tax Burden to Tax Payer.

·         High Liquidity due Lower Tax Liability on Supplies of Goods and Permitted Supplies of Services by Any Tax Payer who is registered under composition Scheme.  

 

Disadvantage of Opting for Composition Scheme to Tax Payer

·         No Input Tax Credit to Any Tax Payer who is registered under Composition Scheme for inward Supplies against outward supply of Goods and Permitted Supply of Services.

·         Any Tax Payer who is registered under composition Scheme can  not make Inter State of Supply of Goods.

·         Any Tax Payer who is registered under composition Scheme not eligible to supply of Exempted Goods or Goods through an E – Commerce Portal (like Amazon, Flipkart, Myntra, Paytm etc.)

·         No Input to Tax Payer who makes inward supplies from Any Tax Payer who is registered under composition Scheme.       

 

 

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