Composition Scheme

Introduction

GST has become a great issue for small business men who used to get their simple VAT return filed in a quarter, but under this GST regime it is required to submit three returns per month. It's something very unfair especially for the small traders, which increases the accounting charges as well as professional charges paid for filing of return. Keeping in mind the trouble of these small retailers and other business houses GST Act has come out with the scheme called 'COMPOSITION SCHEME'

Eligibility for opting Composition Scheme

Small businesses, which have aggregate turnover upto Rs.1 crore (in the 23rd GST Council meeting, increasing the limit to 1.5 crore is proposed, section yet to be amended) in the preceding financial year can opt for composition scheme.

The GST Council has decided that following special category states will have a Rs. 75 lakhs turnover limit for Composition Levy for CGST and SGST purposes.

• Arunachal Pradesh
• Assam
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Himachal Pradesh.

Aggregate turnover (Section 2(6)) means the aggregate value of:

• All taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis),
• Exempt supplies,
• Exports of goods or services or both and
• Interstate supplies

of persons having the same PAN, to be computed on all India basis but excludes Central tax, State tax, Union territory tax, Integrated tax and Cess.

Conditions and restrictions for Composition levy

1. He is neither a casual taxable person nor a non-resident taxable person.

2. The goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section (4) of section 9.

3. The goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the state or from his agent or principal outside the state, where the option is exercised.

4. He shall pay tax under section 9(3)/9(4) (reverse charge) on inward supply of goods or services or both, wherever applicable. (NO ITC is available for tax paid under reverse charge)

5. He is not engaged in the manufacture of goods as notified under section 10(2)(e), during the preceding FY.

6. He is not engaged in making inter-state outwards supply of goods.

7. He is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II (i.e.. Restaurants)

8. He is not engaged in making any supply of goods which are not leviable to tax under this Act, i.e.

• Petroleum crude
• High speed diesel
• Motor spirit (commonly known as petrol)
• Natural Gas
• Aviation turbine fuel.

9. He 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.

10. He shall mention the words 'composition taxable person' on every notice or signboard displayed at a prominent place of business and at every additional place or places of business.

11. The supply of services by Composition taxpayer upto Rs. 5 lakhs per annum will be allowed by exempting the same.

Rate of tax under Composition Scheme

• Half percent of the turnover in State in case of manufacturer,(.50% CGST & .50% SGST)
• Two and half percent of the turnover in State in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II of the said Act, (ie, Restaurants)(2.50% CGST & 2.50% SGST)
• Half percent of the turnover of taxable supplies of goods in State in case of other suppliers (ie Traders).(.50%CGST & .50% SGST)

Compliance

• A composition taxpayer is required to file a return (in form GSTR 4) on a quarterly basis instead of three returns every month as required under normal circumstances.
• Due Date: By 18th of succeeding month of the quarter.
• In addition, taxpayer, required to file an annual return in Form GSTR 9A.
• No requirement of invoice-wise details in their returns.