Composition Scheme
This query is : Resolved
09 July 2017
What is composition Scheme? and how will claim it? what is the percentage for dealer for claiming ITC?
12 July 2017
GST Presentation https://www.caclubindia.com/share_files/details.asp?mod_id=73459
12 July 2017
GST Presentation https://www.caclubindia.com/share_files/details.asp?mod_id=73459
20 July 2024
The Composition Scheme under GST (Goods and Services Tax) is designed to simplify compliance for small businesses and reduce their tax burden. Here’s a detailed overview of the Composition Scheme:
### What is Composition Scheme?
1. **Eligibility**:
- Businesses with an aggregate turnover up to Rs. 1.5 crore in the preceding financial year (Rs. 75 lakh for special category states) can opt for the Composition Scheme.
- Certain businesses such as manufacturers of notified goods and service providers are not eligible.
2. **Tax Payment**:
- Under the Composition Scheme, taxpayers pay tax at a fixed rate on their turnover, instead of the regular GST rates applicable to each supply of goods or services.
- The rates are lower than normal GST rates to ease the tax burden on small businesses.
3. **No Input Tax Credit (ITC)**:
- Businesses opting for the Composition Scheme cannot avail Input Tax Credit on purchases.
- They pay tax only on the value of goods/services supplied and cannot charge GST from their customers.
4. **Filing of Returns**:
- Composition dealers need to file a simplified quarterly return (GSTR-4) instead of three monthly returns.
- Annual return (GSTR-9A) is filed once a year.
### How to Opt for Composition Scheme?
- Businesses eligible for the Composition Scheme can opt for it at the beginning of the financial year or at the time of registration under GST by filing Form GST CMP-02.
- Composition scheme taxpayers must also furnish a statement in Form GST ITC-03 to declare the details of stock and inputs on which ITC is not availed.
### Percentage for Dealer for Claiming ITC:
- Dealers under the Composition Scheme cannot claim Input Tax Credit (ITC) on their purchases. They are required to pay tax at a prescribed percentage of their turnover.
- Since ITC is not available to composition dealers, they are not concerned with the percentage for claiming ITC.
### Conclusion:
The Composition Scheme offers a simplified compliance option for small businesses by providing a fixed tax rate and reducing administrative burdens associated with regular GST compliance. However, businesses opting for this scheme must carefully evaluate its implications, especially regarding their purchasing patterns and cost structure, to determine if it is beneficial for their operations.
### What is Composition Scheme?
1. **Eligibility**:
- Businesses with an aggregate turnover up to Rs. 1.5 crore in the preceding financial year (Rs. 75 lakh for special category states) can opt for the Composition Scheme.
- Certain businesses such as manufacturers of notified goods and service providers are not eligible.
2. **Tax Payment**:
- Under the Composition Scheme, taxpayers pay tax at a fixed rate on their turnover, instead of the regular GST rates applicable to each supply of goods or services.
- The rates are lower than normal GST rates to ease the tax burden on small businesses.
3. **No Input Tax Credit (ITC)**:
- Businesses opting for the Composition Scheme cannot avail Input Tax Credit on purchases.
- They pay tax only on the value of goods/services supplied and cannot charge GST from their customers.
4. **Filing of Returns**:
- Composition dealers need to file a simplified quarterly return (GSTR-4) instead of three monthly returns.
- Annual return (GSTR-9A) is filed once a year.
### How to Opt for Composition Scheme?
- Businesses eligible for the Composition Scheme can opt for it at the beginning of the financial year or at the time of registration under GST by filing Form GST CMP-02.
- Composition scheme taxpayers must also furnish a statement in Form GST ITC-03 to declare the details of stock and inputs on which ITC is not availed.
### Percentage for Dealer for Claiming ITC:
- Dealers under the Composition Scheme cannot claim Input Tax Credit (ITC) on their purchases. They are required to pay tax at a prescribed percentage of their turnover.
- Since ITC is not available to composition dealers, they are not concerned with the percentage for claiming ITC.
### Conclusion:
The Composition Scheme offers a simplified compliance option for small businesses by providing a fixed tax rate and reducing administrative burdens associated with regular GST compliance. However, businesses opting for this scheme must carefully evaluate its implications, especially regarding their purchasing patterns and cost structure, to determine if it is beneficial for their operations.
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