Composition Scheme under GST (Composition scheme for small taxpayers extended to Rs. 1.5 crore)

GST Composition Scheme.

Introduction:Compositionion Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore.

gst composition scheme can opted by any taxpayer whose turnover is less than Rs 1.5 crore. 

What are the advantages of Composition Scheme?
The following are the advantages of registering under composition scheme:

• Lesser compliance (returns, maintaining books of record, issuance of invoices)
  
• Limited tax liability
  
• High liquidity as taxes are at a lower rate
  

What are the disadvantages of Composition Scheme?
Let us now see the disadvantages of registering under GST composition scheme:

• A limited territory of business. The dealer is barred from carrying out inter-state transactions
  
• No Input Tax Credit available to composition dealers
  
• The taxpayer will not be eligible to supply exempt goods or  goods through an e-commerce portal.

What are the conditions for availing Composition Scheme?
The following conditions must be satisfied in order to opt for composition scheme:

• No Input Tax Credit can be claimed by a dealer opting for composition scheme

• The taxpayer cannot make any inter-state supply of goods.

• The dealer cannot supply GST exempted goods

• Taxpayer has to pay tax at normal rates for transactions under Reverse Charge Mechanism
  
• If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
  
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
  
• The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
  
• Those supplying goods can provide services of upto Rs. 5 lakh,

Who cannot opt for Composition Scheme?
The following people cannot opt for the scheme:

• Taxpayer supplying exempt supplies.
  
• Supplier of services other than restaurant related services
  
• Manufacturer of ice cream, pan masala, or tobacco
  
• Casual taxable person or a non-resident taxable person
  
• Businesses which supply goods through an e-commerce operator

Who can opt for Composition Scheme?

• A taxpayer whose turnover is below Rs 1.5 crore* can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.
  
• Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.

How can a taxpayer opt for composition scheme?

• To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal.
  
• This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme.

How Should a Composition Dealer raise bill?

• A composition dealer cannot issue tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket.
  Hence, the dealer has to issue a Bill of Supply.
  
• The dealer should also mention “composition taxable person, not eligible to collect tax on supplies”  at the top of the Bill of Supply.
  

What are the returns to be filed by a composition dealer?

• A dealer is required to file a quarterly return GSTR-4 by 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.
  
• Also, note that a dealer registered under composition scheme is not required to maintain detailed records.
  

Update
Composition scheme for small taxpayers extended to Rs. 1.5 crore
The GST Council in its 23rd meeting in Guwahati has decided to increase the threshold for composition scheme once again to Rs 1.5 crore and also decided to amend the law to increase the statutory threshold to Rs.2 crore.

“There has been an increase in the threshold to Rs 1.5 Crores from the 1 Crore limit. The increase in threshold seems to align itself with the exemption which was applicable under the central excise regime.

The increase in the threshold to Rs 1.5 crore is a welcome relief for small traders/ manufacturers who would now have a simple compliance - this move should not result in in significant revenue loss to the Government, as the dealers opting for the composition scheme would have to forgo the input tax credit available.
There will be a uniform rate of

• 1% ( 0.5% Central tax plus 0.5% State tax) on composition scheme for dealers and manufacturers.
• Manufacturers under this scheme earlier pay 2% ( 1% Central tax plus 1% State tax) of the turnover.
• Restaurant Services pay 5% (2.5% Central tax plus 2.5% SGST) of the turnover and this remains unchanged,
  

Conclusion:-
The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 1.5 crore and pays a flat rate of tax regardless of what they manufacture, provide as a service or trade they carry on. 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.