To give the relief to small dealers, composition scheme has been introduced under GST law. All registered dealer under GST whose gross turnover was less than Rs.50 lakh in preceding financial year can choose this scheme. In case, the dealer has started his business during current financial year and expecting gross turnover less than Rs. 50 lakh. The composition scheme was already available under many state VAT laws. Gross turnover includes taxable and non taxable or exempted sales. The GST Council allowed traders, manufacturers and restaurants with turnover of up to Rs. 75 lakh to avail the benefit of composition scheme. This limit is Rs.50 Lakh for Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh.
CONDITIONS FOR APPLICABILITY OF COMPOSITION SCHEME
- The dealer must be registered under GST law.
- In service sector, Composition Scheme is available only for restaurants.
- The composition scheme is not available for manufacturers of tobacco and manufactured tobacco substitutes, pan masala & ice cream and other edible ice, whether or not containing coca.
- He must not have his gross turnover Rs. 75 lakh or more. Gross turnover includes taxable or non-taxable or exempted sales and export supplies. Now, limit is increased to Rs.75 lakh. However this limit is Rs.50 Lakh for Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh. According to the 22nd GST Council meeting held on 06.10.17 the limit for composition scheme is increased from Rupees 75 lakhs to Rupees one crore. For specified states this limit is increased from Rupees 50 lakhs to Rupees 75 lakhs.
- He should not have any purchase from outside of state and outside of India in his stock at the time of registration under GST law and later on also. However, purchases from other states are allowed.
- He is not allowed to have any stock which has been purchased from unregistered dealer. If the stock held by him contains any purchases from any unregistered dealer then he is liable to tax on such goods.
- He is not allowed to purchase any taxable goods from any other state or from out of India.
- He is not entitled to sell any goods out of state or out of india.
- If he is registered more than one place under same PAN, he can not avail the facility of composition scheme for one place of business unless the all the units under same PAN opt the composition scheme.
- He can not collect tax on supplies from the customers. He has to bear the GST payable by him out of the collection of supplies.
- He is not allowed to take benefit of input credits.
- “Composition Taxable Person, not eligible to collect tax on supplies”, should be displayed on all invoices.
- All dealers under composition scheme must display “Composition Taxable Person” at a prominent place or place of business.
NON-ELIGIBILITY OF COMPOSITION SCHEME
Following persons are not covered under composition scheme:-
- Dealer who supplies the goods outside state.
- Casual taxable persons.
- Non-resident person.
- All service providers.
- Suppliers of non-taxable goods or exempted goods.
- E-commerce operators who supply the goods.
- Manufactures of notified goods.
BENEFITS OF COMPOSITION SCHEME
- Very convenient for small dealers.
- No need to raise tax invoice to customers.
- Tax on sale under this scheme is also very nominal. It varies between 0.1% to 5% on sale.
- There is no need to maintain too many records.
- One return is submitted quarterly in respect of supplies.
- Dealers are not required to give HSN Code in their return.
RATE OF TAX UNDER COMPOSITION SCHEME
- All manufacturers other than notified manufacturers the rate of tax is 2% on sales.
- Suppliers of food and other articles for human consumption or any drink (other than alcoholic liquor for human consumption) i.e. restaurants @ 5% on sales.
- For any other suppliers the rate of GST will be 1% on sales.
Note: Dealers covered under composition scheme can not collect any tax from the customers.
FILING OF RETURN UNDER COMPOSITION SCHEME
Every dealer who has opted composition scheme under GST, has to file a quarterly return in Form GSTR-4 by 18th of next month from end of the quarter. For example, for quarter ending on 30.09.17, the return must be filed upt to 18.10.17. This return gives the details of inward supplies, consolidated details of outward supplies, tax payable and tax paid. Yearly return in Form no. GSTR-9A, is also to be submitted by the dealer by 31st of December of next year. For example, for financial year 2017-18, the annual return must be filed up to 31.12.2018. Annual return shows the consolidated details of quarterly returns.
According to the 22nd GST Council meeting held on 6th Oct’2017, the limit for composition scheme is raised to Rs.1 crore.
According to the 23nd GST Council meeting held on 10th November’2017:-
- Rate of GST for traders and Manufacturers will be 1%.
- The Composition Tax @ 1% shall be charged on taxable goods only. Turnover of exempted goods shall not be included for composition tax purpose.
- The dealer who is supplying goods and services (services not exceeding 5 lakhs in total) eligible for composition scheme.
- The date of GSTR-4 return under composition scheme for the quarter ended on 30th September’2017 is being extended to 24the December’2017.
According to the 28th GST Council meeting held on 21st july’2018:-
- The limit to opt the composition scheme is raised from 1 crore to 1.5 crore.
- The composition dealer (other than restaurant) can supply the services up to Rs. 5 Lakh or 10% of turnover which ever is more.
32nd GST Council Meeting Held on 10.01.2019
Following decision taken by GST Council Meeting held on 10.01.2019:
- Limit of turnover under composition scheme is increased from one crore to 1.50 crore with effect from financial year 01.04.2019. Special category states can decide the limit of turnover under composition scheme within one week.
- Service providers having their turnover less than 50 lakh are also eligible under composition scheme. Under composition scheme they have to pay 6% GST (3% CGST +3% SGST) on turnover. Under composition scheme,no claim of input tax credit is allowed
- Persons registered under composition scheme were previously supposed to file GSTR-4, return every quarterly. Now, they have file only one yearly return. However, they are supposed to deposit tax quarterly.
According to 36th GST Council Meeting Held on 27.07.2019:
Date of adoption of composition scheme by service provider is increased to 30.09.19
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