GST Composition Scheme: Layman Version 101

With the advent of Goods and Service Tax (GST) in India, it has taken a toll on the minds of lots of CAs, Accountants and businessmen, among others. In fact, a few people have taken a dig on GST by saying, if they had to marry “Deepika” or a “CA explaining GST to them”, they’d definitely marry the CA, in a blink of an eye!

But it is pertinent to state that GST has been an important milestone that India has achieved after its acceptance and implementation. Government is trying to get hold of the comprehensive structure of GST itself and thus has inserted the option of adopting a Composition Scheme to facilitate the understanding and ease of compliance with GST in a phased manner.

A Composition Scheme is an option under which the small businessmen and taxpayers have a relief from the cumbersome compliance procedures and to pay a minimal amount of tax without indulging into the complex calculations that GST requires.

The Composition scheme is available to persons engaged in manufacturing and trading of goods and restaurant services whose Annual Turnover is up to INR 1.5 crores (INR 15 million), which is INR 75 lakhs in case of North Eastern states and Himachal Pradesh. It is to be noted that turnover of all businesses registered with the same PAN should be taken into consideration to calculate the Annual Turnover.

In case the taxpayer is taking a New Registration under GST regime, then the person is required to opt for the Composition Scheme in Part B of Form GST-REG-01.

In case the taxpayer is already registered under GST regime, then they have to intimate the option electronically prior to the commencement of the Financial Year i.e. before 31st March in Form GST CMP-02.

Also, persons who cannot avail the Composition Scheme are also quite a few:

• Taxable Person who is engaged in providing Services except for Restaurant services.
• A taxable person who makes Interstate outward supply of goods. Although, they can still make an interstate purchase of goods without losing out on the Composition Scheme.
• A taxable person who makes any supply through E-commerce operator.
• Taxable person who makes any supply of goods which are not leviable to GST as of now, like alcohol, petrol, diesel, tobacco, pan masala etc.

A few important stipulations attached to the Composition Scheme are listed as follows:

• Non-maintenance of detailed books of records with respect to Input & Output Tax, Stock details etc.
• Non availment of Input Tax Credit of GST on purchases.
• Non chargeability and collection of GST from the end customer.
• Non issuance of Tax Invoice, instead of that issue Bill of Supply.
• Non filing of Monthly returns, instead file Quarterly returns.

Further, Rates of GST are also divided only in two major categories which are:

• Manufacturer and Trader of Goods: CGST (0.5%) + SGST (0.5%)
• Restaurant (Not serving alcohol): CGST (2.5%) + SGST (2.5%)

However, the total GST payable shall include Tax on supplies (net of advance and goods returned) + Tax on B2B transactions where Reverse Charge is applicable + Tax on B2B purchases from Unregistered suppliers + Tax on Import of Services.

It is to be noted that the rate of Tax on transactions under Reverse Charge, purchase from an unregistered dealer and import of services will be at normal rates, i.e. the rates applicable to the supplies. Rates under Composition Scheme are applicable only to sales of a composition dealer.

A major relief in the return filing domain has been provided in the sense that the person opting for the Composition Scheme has to file a Quarterly return in form GSTR-4, the due date of which is 18th of the month succeeding the respective quarter. The late filing fee is Rs. 50 per day of delay and Rs. 20 per day of delay in case of NIL return.

On a wholesome reading of the above provisions and stipulations of the Composition Scheme, it can be gathered that the scheme is a means to provide a relief to the small businessmen as they form the backbone of any society and should be given enough incentives to prosper at their growth stage so that they could grow bigger and better to ultimately support the economy of the nation.