The proposed GST law is going to be implemented very shortly. Big companies/business houses will have sufficient expertise and work force for complying , maintenance of books of accounts and filing the returns under GST. But on the other side, SMEs, Start ups and small companies/traders will not be having such a big work force for complying with the GST regulations with regard to maintenance of details records, reconciliation etc.,
A separate scheme was available in earlier VAT law. A Similar Scheme is proposed in the GST law also. Let us know about the same in this Article.
Who can opt for Composition Scheme under GST ?
Assessees who deal in goods (either trader or manufacturer) can opt for this Composition scheme.
Can a person providing Services opt for this scheme?
No. This is applicable only for dealers dealing with goods (Traders/Manufacturers).
What is the rate of tax (GST) Payable under Composition Scheme?
| Type of Dealer | Rate of Tax |
|
Manufacturer
|
1%
|
|
Restaurants
|
2.5% |
|
Others (Retailers/wholesalers) |
0.5%
|
Is this Scheme Compulsory for Small Assessees ?
No. This is optional. If the small dealers do not wish to opt for this scheme, they can opt for regular scheme of Input Credit based scheme.
How to opt for this Scheme?
The assessees who intent to opt for this scheme shall make an application exercising this option to pay tax under this scheme. Once this is approved , it is valid until it is cancelled or he becomes ineligible.
Should the assessee opt for Composition scheme for all businesses across India
Yes. Since the assessee is covered under same PAN all over India, he needs to opt for Composition scheme across India.
Can Composition dealer make Inter state sales?
No. An assessee opting for composition scheme cannot make Inter state sales. (ie) Sale from one state to another
Can composition dealer collect Tax from his customers?
No. The composition dealer cannot collect tax from his customers in the Invoice. The tax payable (0.5%, 1% or 2.5%) as the case may be shall be on the bill value payable by the composition dealer.
Can composition dealer claim the Input Tax credit?
No. The Input tax Credit (Tax paid on the purchases) cannot be claimed by the composition dealer.
Can the customer who buys from Composition dealer claim Composition tax as Input tax Credit?
No. A customer who buys from the Composition scheme dealer is not eligible to claim the tax paid under Composition scheme as Input Tax Credit.
What happens if a Composition dealer violates any of the conditions after opting for the scheme?
If any assessee violates any conditions of the Composition scheme, he will be liable to pay taxes as applicable to a regular dealer along with a penalty of equivalent amount.
How to calculate the aggregate turnover?
Aggregate Turnover = Value of All taxable supplies + exempt supplies + Export Turnover
What are the return filing obligations of the Composition dealer?
The Composition dealer shall file the following forms :-
Form GSTR – 4 – Quaterly Return – to be filed on a Quarterly basis
Form GSTR – 9 A – Annual Return – to be filed on Annual basis
What are the relevant forms for Composition scheme ?
The option of Composition levy can be filed electronically through form GST CMP-01
What happens if a Composition dealer buys goods from a unregistered dealer
The composition dealer who purchases goods from an unregistered dealer shall pay taxes due on the same on reverse charge basis.
What happens if a composition dealer fails to file Quarterly returns
Consequence 1 :- A penalty for non filing @ Rs. 100/- per day upto maximum of Rs. 5000 is payable.
Consequence 2 :- If Quarterly returns are not filed for 3 consequtive tax periods (Quarterly), the registration under the GST will be cancelled.
Should a Composition dealer maintain detailed records?
No. Compared to Normal dealer, Composition scheme dealer need not maintain detailed records under GST.
Comparitive Analysis under Regular Scheme & Composition Scheme
| Particulars | Regular Scheme |
Composition Scheme |
|||||
| Gross | Tax @ 10% | Gross | Tax @ 10% | ||||
| Purchases | 100 | 10 | 100 | 10 | |||
| Sales | 120 | 12 | 120 | 1.2 | |||
| Net Tax Payable | 2 | 1.2 | |||||
| Net Out flow (for taxes) | 2 | 11.2* | |||||
| * Tax on Sales Rs. 1.20 plus Tax on purchases Rs.10/- | |||||||
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