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GST - Composition Q&A

MJL co 
on 22 July 2017

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Mr. A Good Day Sir, how are you?
CA: Hi Mr. A, I am doing fine, how about you?

Mr A Doing Good, So today can you tell me about the Composition scheme under GST?

CA: Sure Mr. A, there is a provision of composition scheme under GST provide under Section 10. Any Person whose aggregate turnover (Taxable + Exempted) in preceding financial year did not exceed 75 Lac (50 Lac for special category states), then that person can apply for registration under composition scheme.

Further, if in case a taxable person has different business segments (like Textile, Grocery etc) having same PAN as held by the taxable person, he must register all such businesses under the scheme. Hence, all the business under one PAN should opt for Composition scheme.

Mr A: Ok, and if cross the limit of 75 lakhs in current year then can I continue with composition scheme for rest of the year?

CA: No, Mr. A. The option of composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs.75 Lakhs. In such cases, the person has to file form GST CMP-04 within seven days intimating withdrawal from composition scheme.

Mr A: Ok is there is any exception for any class of business entity who cannot enroll in composition scheme?

CA: Actually, apart from the criteria of 75 lakhs, there is a list of persons who cannot opt for composition scheme even if there turnover is below 75 lakhs. They are:

i) Any service provider except restaurant service
ii) Person dealing in goods which are not covered under this act like Liquor
iii) Person having interstate supply
iv) Person supplying through e-Commerce operator
v) Person manufacturing goods as notified by government

So these persons will not be eligible to take registration under Composition scheme in GST.

Mr A: Ok, so if I have to opt the composition for only one of my business, then I cannot opt it?
CA:
Yes, Mr. A. Your all business under one PAN should go for composition. It is not possible to register one entity in composition and another as normal using one PAN.

Mr A Ok, so what are the rates in Composition scheme?

CA: In GST, there is no single rate for Composition dealers. The rates in GST for composition dealers is dependent on nature of dealer. The rates are as follows:

Manufacturers 1%
Specific service provider i.e. restaurant service 2.5%
Any other dealer 0.5%

Also, please note that any person registered under composition scheme will not be eligible to claim any input tax credit.

Mr A Ok, so are these the final rates?

CA: These rates for CGST act and similarly there will be SGST/UTGST rates. Hence, the final composition rates will be total of CGST and SGST rates. For example, if in Rajasthan GST also the composition rate is 1% for manufacturers then the total composition rate for manufacturer will be 2% (CGST+SGST).

Also, instead of monthly returns, there are quarterly returns in composition scheme which makes this scheme easier form the point of view of compliance. We will discuss on the returns requirement under GST in our next discussion.

Mr A What are the invoice formats for Composition dealers in GST?

CA: Under GST, every Composition dealer shall issue a bill of supply for sales. In that bill of supply, he shall mention the words "Composition taxable person, not eligible to collect tax on supplies". Also, he shall mention the words "Composition Taxable person" on every notice or signboard displayed at place of business.

Mr A Ok, Awesome. Thanks for clearing the concept of Composition scheme under GST :)


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