Understanding GST Composition Scheme for Small Businesses
Explore the benefits and conditions of the GST Composition Scheme for small dealers, including simplified tax payment, relaxed record-keeping requirements, and quarterly returns. Learn about the implications for suppliers of goods and limited services, as well as the conditions for opting into this scheme. Join the webinar on 28th Feb 2023 in Kolkata to delve deeper into this topic with expert Chartered Accountants.
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GST KEY TOPICS GST WEBINAR EIRC KOLKATA -COMPOSITION SCHEME 28THFEB 2023 CHARTERED ACCOUNTANTS DAS DAS & CO DAS DAS & CO Chartered Accountants Govind Bhaban, 2 Brabourne Road, Kolkata 700001 ca.indranildas@gmail.com/9831171826 DAS DAS & Co Chartered Accountants
ABOUTTHESPEAKERS CA Indranil Das, FCA, DISA. Certificate in GST Pleading and Practice ( ICAI) CA Indranil Das is a practicing Chartered Accountant in practice for the past 12 years. He attained fellowship in the year 2016 from ICAI. He is extensively practicing in Direct and Indirect Taxation. A member of Direct Tax Professional Association Kolkata and Accountants Library Kolkata. He has attained Diploma in Information Systems Audit from ICAI. Specializes in GST Pleading and Practice and represents clients before Advance Ruling Authority, Adjudicating Authority. Has provided corporate trainings to large corporates like BSNL, HPCL,SBI to name a few. CHARTERED ACCOUNTANTS DAS DAS & CO . DAS DAS & Co Chartered Accountants
TOPICS FOR DISCUSSION COMPOSITION SCHEME SUPPLIER OF GOODS SUPPIER OF SERVICES REGISTRATION INTIMATION RETURNS WITHDRAWAL OF SCHEME DAS DAS & CO ACCOUNTANTS CHARTERED
WHATISCOMPOSITIONSCHEMEUNDER GST? The word Composition has been defined under Oxford Dictionary to mean a legal agreement to pay a sum in lieu of a larger debt or other obligation Basic benefits to small dealers under this scheme are: Allows to pay a fixed percentage amount on turnover without availing benefit of ITC Relaxation in the matter of maintenance of accounts and records Provide a return form with simple information to be filled Provide 1 single return with payment of tax on quarterly basis as against 16 returns to be filed in a year. DAS DAS & CO CHARTERED ACCOUNTANTS
SUPPLIEROFGOODSANDFORLIMITEDSERVICES Section 10: The provisions of Composition Scheme under the CGST Act, 2017, overrides all other provisions of the said Act. However, it is superseded by Section 9(3) and 9(4). Even though a person has opted for Composition Scheme, and even though he might not be entitled for ITC, of the tax paid under RCM, but still he is required to pay tax under RCM. DAS DAS & CO CHARTERED ACCOUNTANTS Example: Mr. X is a Composition Dealer. Mr. X has paid Rs.50,000 to his lawyer for advocating a civil matter before the High Court.
CONDITIONSFOROPTINGFORCOMPOSITIONSCHEME Note: All composition dealers may supply services* of value <= 10% of Turnover or Rs.5 lakhs, whichever is higher Threshold: Aggregate Turnover < = Rs.1.5 crore DAS DAS & CO CHARTERED ACCOUNTANTS Person engaged in supply of servicesbeing food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) Other RTP eligible to opt under 2A of Sec 10 Person engaged in manufacture Other suppliers Rate of Tax: 1% of the Taxable Supplies Rate of Tax: 6% Rate of Tax: 1% Rate of Tax: 5%
ELIGIBILITY TO OPT FOR THE SCHEME Definition of Aggregate Turnover. E 1 AT in case of multiple entities in different states under same PAN W.E.F 1st April, 2019, North Eastern states (Except Assam), Sikkim and Uttarakhand, threshold for AT is Rs.75 lakhs, for eligibility to opt for Composition Scheme AT Shall include the value of supplies made by such person from the 1st day of April of a Financial Year up to the date when he becomes liable for registration under this act BUT shall not include the Value of exempt Supply of Services provided by Way of extending deposits, loans or advances in so far as consideration is represented by way of interest or discount shall not be taken into account for determining the value of Turnover in a State or UT. DAS DAS & CO CHARTERED ACCOUNTANTS
ELIGIBILITY TO OPT FOR THE SCHEME To CHECK Marginal Supply of Service Supply of Service is ALLOWED marginally for a Goods Supplier in the following manner: DAS DAS & CO CHARTERED ACCOUNTANTS Persons engaged in Making clause (b) Para 6 of Schedule II E 2 Persons engaged in Supply of Service ( other than above) of value not exceeding 10 % of Turnover in a STATE or UT in the Preceding FY or 5 Lakhs whichever is higher E 3 Services by way of extending Deposits, Loans or Advances in so far as the consideration is represented by way of Interest or Discount. E 4
TURNOVERINASTATEORUTFORTAXPAYABLE For the Purpose of Tax Payable The Turnover in State or UT Shall not include Supplies made by such person from 1st Day of April of FY upto the date when he becomes liable for registration under this act The value of Exempt Supply of Services provided by way of extending deposits, loans or advances in so far as consideration is represented by way of interest or discount shall not be taken into account for determining the value of Turnover in a state or UT DAS DAS & CO CHARTERED ACCOUNTANTS
ELIGIBILITY TO OPT FOR THE SCHEME Case Study 1: Mr. R of Rajasthan wants to opt for Composition Scheme for the F.Y. 2020-21. P.Y. turnover Rs.165 lakhs. Is he eligible? What if his P.Y. turnover was Rs.125 lakhs? DAS DAS & CO CHARTERED ACCOUNTANTS ANSWER: First is YES and second is NO.
TO OPT FOR THE SCHEME Case Study 2: Mr. a has establishments in 2 states with the following turnovers in each state: Rajasthan- Rs.60 lakhs Uttarakhand- Rs. 30 lakhs He wants to opt for CS in Rajasthan. Can he do so? DAS DAS & CO CHARTERED ACCOUNTANTS ANSWER: If Composition Scheme taken in one state, he has to take composition scheme on all the registrations he has obtained across the states on the same PAN. In Rajasthan he is eligible on stand alone basis. However the establishment in Uttarakhand has the threshold limit of 75 lakhs. Since he cannot for Uttarakhand, he will not be for Rajasthan.
TO OPT FOR THE SCHEME Case Study 3: Particulars Example Manufacturer PYAT- 125 lakhs, (G) Restaurant Owner PYAT- 125 lakhs, (S) Other Supplier PYAT- 125 lakhs, (G) DAS DAS & CO CHARTERED ACCOUNTANTS E1- E1- E2- E1- Applying for CS Eligible Eligible Eligible
TO OPT FOR THE SCHEME Case Study 4: MR. X is a Supplier of Exempted Services Particulars Example Manufacturer PYAT- 55 lakhs, TT (G)- 60 lakhs, ET (S)- 8 lakhs Interest- 2 lakhs Restaurant Owner PYAT- 55 lakhs, TT (G)- 60 lakhs, ET (OS)- 8 lakhs Interest- 2 lakhs Other Supplier PYAT- 55 lakhs, TT (G)- 60 lakhs, ET (S)- 8 lakhs Interest- 2 lakhs DAS DAS & CO CHARTERED ACCOUNTANTS E1- E2-NA E3- E4- E1- E2- E3- E4- E1- E2-NA E3- E4- Applying for CS IN ELIGIBLE IN ELIGIBLE IN ELIGIBLE
TO OPT FOR THE SCHEME Case Study 5: MR. X is a Supplier of Taxable Services Particulars Example Manufacturer PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (S)- 3 lakhs Interest- 2 lakhs Restaurant Owner PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (OS)- 3 lakhs Interest- 2 lakhs Other Supplier PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (S)- 3 lakhs Interest- 2 lakhs DAS DAS & CO CHARTERED ACCOUNTANTS E1- E2-NA E3- E4- E1- E2- E3- E4- E1- E2-NA E3- E4- Applying for CS ELIGIBLE ELIGIBLE ELIGIBLE
PAYMENTOFTAX Case Study 5: MR. X is a Supplier of Taxable Services Particulars Example Manufacturer PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (S)- 4 lakhs Interest- 2 lakhs Restaurant Owner PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (OS)- 4 lakhs Interest- 2 lakhs Other Supplier PYAT- 55 lakhs, TT (G)- 60 lakhs, TT (S)- 4 lakhs Interest- 2 lakhs DAS DAS & CO CHARTERED ACCOUNTANTS 64 Lakhs 64 Lakhs 64 lakhs Turnover of State/UT for the Purpose of Tax 0.64 3.20 0.64
TO OPT FOR THE SCHEME Case Study 6: Mr. Kapoor is having turnover of 154 lakhs in the PY for the following cases: a) Dealing in 100% Exempted Goods/Services.( He is Unregistered) b) Dealing in 50% Exempted and 50% Taxable Goods/Services. Only Earns Interest on Fixed Deposit. Can Mr Kapoor OPT for CS under Both Cases? DAS DAS & CO CHARTERED ACCOUNTANTS c) ANSWER: Ineligible in Both the Cases. Eligible in 3rd Case.
OTHER CONDITIONS FORELIGIBILITY The E1 till E4 is the Main Condition. Person making any supply of goods or services which are not leviable to tax under this act.(Petroleum Crude, HSD, Alcohol) Person making inter-state outward supplies of goods & services. 4. Person making any supply of goods/services through ECO who is registered to collect tax at services u/s 52. Specific Manufacturer of goods cannot opt for Composition Scheme.- Ice Cream, PAN Masala, Tobacco, Aerated Water, Fly Ash Bricks, Bricks of Fossil Meals, Building Bricks, Earthen or Roofing Tiles Person should not be Casual Taxable Person nor a Non resident taxable person 1. 2. DAS DAS & CO CHARTERED ACCOUNTANTS 3. 5. 6.
OTHER CONDITIONS FORELIGIBILITY 7. Goods held in Stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under 9(4) of the CGST Act.- This provision is not relevant now. DAS DAS & CO CHARTERED ACCOUNTANTS 8. He shall pay tax under 9(3) of the CGST Act, 2017
CHANGESMADEFORCOMPSUPPLIERTHROUGHECOM Person making any supply of goods/services through ECO who is required to collect tax at source u/s 52 are NOT Eligible. Changes brought in Budget 2023 a) Section 10 of CGST Act, 2017, amended to remove restriction imposed on registered person suppling goods through E- commerce Operator from opting in for composition scheme. 1. DAS DAS & CO CHARTERED ACCOUNTANTS b) b) Such Composition Taxpayers can make only Intra State Supply of Goods . Inter State is still restricted.
FEW QUESTIONS Question 1: A is a CTP supplying Goods. D is another CTP in the same state. Can A supply goods to D? Yes he can. DAS DAS & CO CHARTERED ACCOUNTANTS Ans- Question 2: A is a CTP supplying Goods. He purchased Goods from D from another state. Can A purchase such goods from D? What will the answer if A sell to D? Yes he can. There is no restriction on such a person to import goods from outside the state by a person who has opted from Composition Scheme. He is restricted to sale to D as Inter State Supply is restricted. Ans- Question 3: A is supplying Alcoholic Liquor. Can he opt for CTP Registration? No he cannot. IF one is engaged in supplying Goods not liable to tax, Sec 10 debar a person to opt for Composition Scheme. Ans-
FEW QUESTIONS Question 4: A person came to the state of West Bengal to attend an exhibition from the State of Maharashtra. He intends to book a stall and gets himself registered as a Casual Taxable person. Can he opt for Composition Scheme? No as per Sec 10 Casual Taxable person cannot opt for Composition Scheme. DAS DAS & CO CHARTERED ACCOUNTANTS Answer- Question 5: Mr. Kapoor is having turnover of 123 lakhs in the PY. He is a Dealer and trades in Sale of PAN Masala. Can he opt for Composition Scheme? He is eligible as Restricted Condition is for Manufacturer.
FORMIXEDSUPPLIERORSUPPLIEROFSERVICE (SECTION 10(2A)) Subject to the provisions of 9(3) and 9(4) of CGST Act 2017, A Registered Person whose Aggregate Turnover in the preceding Financial Year did not exceed Rs 50 Lakhs, may opt to pay tax as may be prescribed but not exceeding 3 % of the Turnover in State/UT. Inserted in CGST Act 2017 from 1.1.2020 vide Finance Act 2019. Only if he is not eligible to OPT for Composition Scheme under Sec 10(1) and 10(2). Eligibility and Opting are two different aspects. If Eligible u/s 10(1) and 10(2) and still may not opt. Then Window for 10(2A) is closed as well. DAS DAS & CO CHARTERED ACCOUNTANTS
FORMIXEDSUPPLIERORSUPPLIEROFSERVICE (SECTION 10(2A)) Wants to Opt For 10(2A) DAS DAS & CO CHARTERED ACCOUNTANTS Eligible for 10(1)/10(2)? Eligible for 10(1) /10(2)? YES NO Then OPT therein or wait for Ineligibility as above Then OPT for 10(2A).
SECTION 10(2A) OVER SECTION 10(1) AND 10(2) A person may Opt for 10(2A) over 10(1) and 10(2) knowing that he has to pay more tax, only when he knows that he will soon become ineligible u/s 10(1) and 10(2) and by the time the ineligibility occurs TIME LIMIT for opting u/s 10(2A) will be over. DAS DAS & CO CHARTERED ACCOUNTANTS Mr. Rakesh wanted 10(2A) but had to opt for 10(1) during NEW Registration. Since Ineligibility to OPT OUT of 10(1) was not there. Within a month, he was ineligible as his turnover crossed 5 Lakhs. He cannot now OPT for the scheme u/s 10(2A).
INELIGIBILITY (SECTION 10(2A)) Engaged in NON GST Supply of Goods and Services Engaged in the making of Inter State Outward Supplies of Goods and Services Engaged in making any supply of goods/services through e- commerce operator who is required to collect tax u/s 52. A manufacturer of such goods or supplier of such services as may be notified by Govt. ( PAN Masala, Ice Cream, Tobacco, Aerated Water) A Casual Taxable Person or a non-resident taxable person. DAS DAS & CO CHARTERED ACCOUNTANTS
CALCULATIONOFTAXPAYABLE (SECTION 10(2A)) Same as discussed in 10(1) Provisions Exclusion 1- Supplies from 1st Day of April of a Financial Year upto the date when such person becomes liable for Registration Exclusion 2- Exempt Supply of Services provided by way of extending deposits. Sec 10(2A) Overrides the Notification No 2/2019 dated 7.3.2019. If the Outward Supply of a person registered u/s 10(2A) is liable for RCM and liability is on the Recipient, such supplies are not to be taxed again in the hands of the Service Provider. DAS DAS & CO CHARTERED ACCOUNTANTS
TO OPT FOR THE SCHEME Case Study 7: Mr. Z has applied for Registration when his turnover was Rs 18 lakh. Whether he will get additional Turnover of 50 lakhs for the purpose of Determining eligibility or he would only get additional turnover of Rs 32 lakh and after that he would have to opt out of the scheme? DAS DAS & CO CHARTERED ACCOUNTANTS Answer: For the Purpose of Eligibility, the turnover will include supplies from 1st April to the date from which he becomes liable for registration. Therefore the Turnover of 18 lakhs would be INCLUDIBLE. And he will only get 32 lakhs to remain in the scheme. For the Purpose of TAX Payable, first supply of Goods or Services shall not include supplies from 1st April of a FY till he becomes liable for Registration. So pay Tax on 32 lakhs only.
TO OPT FOR THE SCHEME Example: Scenario 1: Taxable Supply of Goods: 15 lakhs Exempt Supply of Services: 10 lakhs. Tax Liability 1.5 lakhs. Scenario 2: Taxable Supply of Goods: 25 lakhs. Tax Liability 1.5 lakhs. Scenario 3: Exempt Supply of Services: 25 lakhs. Tax Liability 1.5 lakhs. DAS DAS & CO CHARTERED ACCOUNTANTS
MISCELLANEOUSPOINTS A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax from their customers. Moreover Tax has to be paid on exclusive basis. 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. DAS DAS & CO CHARTERED ACCOUNTANTS
INTIMATION PROCEDURES CASE 1- WHERE PERSON HAS MIGRATED TO GST GST CMP 01 was the intimation form which was to be availed for applying under Composition Scheme for persons who got provisional Registration. CASE 2- WHERE PERSON APPLIES FOR FRESH REG Any person seeking Registration has the option to choose composition scheme in PART B of the registration application in FORM GST REG 1. Once selected, it is considered as Intimation to pay tax under Sec 10 of the CGST Act. DAS DAS & CO CHARTERED ACCOUNTANTS CASE 3- WHERE PERSON APPLIES FROM REGULAR TO COMP SCHEME He has to file CMP 02 prior to the commencement of FY for which the option to pay tax is exercised. Hence the Last Date to intimate is 31st March of the previous Financial Year. This option is followed by ITC 03.
INTIMATION PROCEDURES GST ITC 03- STOCK INTIMATION In addition to filing the application to OPT for Composition Scheme, you need to file a Stock Intimation to furnish the details of stock held by you, on the day preceding the date from which you opt to pay the Composite Tax. To be filed within 60 days from the commencement of the Financial Year for which Composition Scheme is opted. It is an intimation of Reversal of ITC/Payment of Tax on inputs held in stock, inputs contained in semi-finished or finished goods held in stock and capital goods. Method of Reversal in sec 18(4) read with sub-rule(4) of Rule 44. CMP 03 is only an intimation of stock details to be filed additionally within 90 days of filing of CMP 02. DAS DAS & CO CHARTERED ACCOUNTANTS
MISCELLANEOUSPOINTS Only from the beginning of FY normal dealer can opt for Composition Scheme. The computed input tax credit shall be paid either by debiting the electronic credit ledger, if it having sufficient balance and otherwise, balance amount shall be paid through electronic cash ledger immediately preceding the date of exercising such option. It should be noted that the remaining balance in the electronic credit ledger, after debited the input tax credit in respect of stock & capital goods lying shall be lapsed. Option once filed may not be required to renew every unless otherwise decided to opt out. DAS DAS & CO CHARTERED ACCOUNTANTS
RETURNS Form CMP-08 Particular Statement containing the details of payment of self- assessed tax Return Periodicity Every Quarter or Part Thereof Due Date 18th of the month succeeding the Quarter DAS DAS & CO CHARTERED ACCOUNTANTS GSTR-4 Every FY or part Thereof 30th Day of April following the end of such financial year The 49th GST Council Meeting in Para 4 has proposed to bring Amnesty in respect of passending returns to Form GST-4,9 and 10 by way of conditional waiver/reduction of late fees.
LIABILITY TO FILE ANNUAL RETURN IN GSTR-9A A registered person who has opted for composition levy is required to file annual return in GSTR-9A.However for the years 2017-18 and 2018-19 vide Notification No.47/2019-Central Tax dated 9th October 2019, filling of GSTR-9A was made optional for Registered persons whose aggregate turnover in a financial year did not exeed 2 crore rupees. It was further provided that the said return shall be deemed to be furnished on due date if it has not been furnished before due date. DAS DAS & CO CHARTERED ACCOUNTANTS
WITHDRAWAL FROM SCHEME Form CMP-08 Particular Statement containing the details of payment of self- assessed tax Periodicity Period for which he has paid tax under the composite scheme. Due Date 18th day of the month succeeding the quarter in which the date of withdrawal falls 30th day of April following the end of the financial year during which such withdrawal falls. DAS DAS & CO CHARTERED ACCOUNTANTS GSTR-4 Return Period for which he has paid tax under the composite scheme.
WITHDRAWAL FROM SCHEME- MISC Permission granted for payment of Composition Levy in lieu of taxes shall lapse with effect from the day on which his annual aggregate turnover during a financial year exceeds the threshold limit as prescribed. He is liable from the day he ceases to satisfy conditions for composition Within 7 days from occurrence of such event, file intimation for withdrawal in FORM GST CMP 04. Issue Tax Invoice thereafter. Improper Option for Composition may attract penal provisions. File GST ITC 01 with details of stock of inputs and inputs contained in semi finished or finished goods held in stock by him on the date on which option is denied or withdrawn. 30 days from such. DAS DAS & CO CHARTERED ACCOUNTANTS
DAS DAS & CO CHARTERED ACCOUNTANTS THANK YOU
