All about GST Composition Scheme
All about Composition Scheme
|1. What is Composition Scheme?|
2. What is the specified rate of composition levy?
3. Who are the persons not eligible for composition scheme?
4. Return to be filed by Composition Dealer
5. Forms regarding registration and withdrawals for the composition dealer
6. Can Tax Invoice be issued by a Composition Dealer?
7. Can composition dealer charger GST in the invoice issued by him?
8. Penalties for composition dealer
Latest update as per 23rd GST Council Meeting held on 10th Nov 2017
Threshold for composition scheme has been increased to 1.5 crore (from earlier 1 crore)
What is Composition Scheme?
The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 1.5 Cr ( *Rs. 75 lakhs in case of few States). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.
*In the case of the following states, the limit of turnover is of Rs. 75 lakhs:
- Arunachal Pradesh
- Himachal Pradesh
What is the specified rate of composition levy?
|Composition Scheme- applicable GST Rate|
|Types of Business||CGST||SGCT||Total|
|Manufacturer and Traders ( Goods)||0.5%||0.5%||1.0%|
|Restaurants not serving alcohol||2.5%||2.5%||5%|
|Service Providers are not eligible for composition scheme|
Who are the persons not eligible for composition scheme?
Following persons are not allowed to opt for the composition scheme:
- A casual taxable person or a non-resident taxable person;
2. Suppliers whose aggregate turnover in the preceding financial year crossed Rs. 1.5 Cr.;
3.Supplier who has purchased any goods or servcies from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis;
4. Supplier of services, other than restaurant service;
5. Suppliers making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52;
6. A manufacturer of following goods:
|S No.||Classification(Tariff Item/ Chapter)||Descriptions|
|1||2105 00 00||Ice cream and other edible ice, whether or not containing cocoa|
|2||2106 90 20||Pan masala|
|3||24||Tobacco and manufactured tobacco substitutes|
Return to be filed by Composition Dealer:
A dealer is required to file a quarterly return GSTR-4 by the 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.
The due dates are as follows:
|Annual Return||31st Dec of following year|
|As per 23nd GST Council Meeting held on 10th Nov 2017|
Due date of FORM GSTR-4 for the quarter July-September, 2017 is extended to 24.12.2017
Other relevant return for Composition Dealer:
|GST CMP-01||Intimation to pay tax under Sec 10( Composition Levy)||Only for persons registered under the existing law migrating on the appointed day|
|GST CMP-02||Intimation to pay tax under Sec 10( Composition Levy)||For persons registered under the CGST Act|
|GST CMP-03||Intimation of details of stock on date of opting for composition levy||Only for persons registered under the existing law migrating on the appointed day|
|GST CMP-04||Intimation/Application for Withdrawal from Composition Levy||Any person registered for composition scheme.|
|GST CMP-05||Notice for denial of option to pay tax under section 10||For concerned person (why the option to pay tax under section 10 shall not be denied.)|
|GST CMP-06||Reply to the notice to show cause||For concerned person|
|GST CMP-07||Order for acceptance / rejection of reply to show cause notice||For concerned person|
Other Important points:
- A composition dealer shall not be entitled to any credit of Input tax. Simultaneously he shall not collect any tax from the recipient on supplies made by him.
- If the composition dealer purchased the goods from unregistered person, than then provisions of reverse charge mechanism will be applicable on composition dealer, and he will have to pay tax under normal scheme.
- The registered person paying tax under section 10 shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and
- The registered paying tax under section 10 person shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
Can Tax Invoice be issued by a Composition Dealer?
No, a composition dealer can not issue a tax invoice, rater they need to issue Bill of supply.
As composition dealer can not charge GST from their customers. They have to pay it out of their own pocket.
The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.
Can a composition dealer charger GST in the invoice issued by him?
No a composition dealer can not charge GST in their invoice, as the payment of tax has to be made by them from his own pocket.
What are the penalties in case of violation of Composition provisions by a registered person?
If a registered violated the provisions related with composition scheme mentioned under section 10, and If the proper officer has reasons to believe that a taxable person has paid tax under composition scheme despite not being eligible, such person shall be liable the following:
- Tax that may be payable by him under any other provision of CGST Act;
For the calculation of above provisions of Sec 73 and Sec 74 shall be applicable.