Understanding the Composition Scheme under GST
The Composition Scheme under GST allows eligible taxpayers to pay a fixed percentage of their turnover as tax and enjoy simplified compliance requirements. This scheme comes with turnover limits, tax rates, and eligibility criteria for different categories of businesses. Learn about who can opt for the scheme, the turnover limits, tax rates, and exceptions to eligibility in this comprehensive guide.
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COMPOSITION SCHEME CA VARSHA LUND
TURNOVER LIMIT FOR COMPOSITION SCHEME Rs.75 lacs for Special Category States i.e. Arunachal Pradesh , Manipur, Meghalaya, Mizoram ,Nagaland,Sikkim,Tripura and Uttarakhand. Rs.1.5 crores for Rest of India
AGGREGATE TURNOVER INCLUDES Taxable Supplies Exempt Supplies Export of Goods / Services
AGGREGATE TURNOVER EXCLUDES Inward Supplies under reverse charge mechanism Taxes (CGST , SGST, IGST and UTGST) Turnover has to be computed PAN wise All registered persons under the same PAN have to either opt or not to opt for the scheme. i.e. if one person opts for normal scheme , all others also become ineligible for the scheme.
TAX RATES FOR COMPOSITION SCHEME Sr. No. 1 2 Category Manufacturers Restaurant and Outdoor Catering Service Traders Supplier of only services or Mixed Suppliers (Goods and Services) CGST 0.5% 2.5% SGST 0.5% 2.5% Total 1% 5% 3 4 0.5% 3% 0.5% 3% 1% 6% ******
COMPOSITION SCHEME TAXPAYERS PERMITTED TO RENDER SERVICES OTHER THAN RESTAURANT SERVICES Generally only a supplier of restaurant service is eligible for composition scheme. However recently, supplier of goods who also provide services other than restaurant services is eligible to opt for composition scheme subject to certain specified limits. A registered person supplying goods, if also engaged in supply of services is eligible to opt for composition scheme if the supply of services does not exceed the specified limits i.e (a) 10 % of the turnover in the preceding financial year (or) (b) Rs. 5 lakhs
ILLUSTRATION Mr. A has aggregate turnover of Rs. 60 lakhs in the state of Maharashtra i.e. his turnover is below Rs. 1.5 crores. So he can opt for composition scheme. Further , even if he provides services upto Rs. 6,00,000/- (i.e. 10 % of Rs. 60,00,000/- or Rs. 5,00,000/- whichever is higher) , he is eligible to opt for composition scheme.
PERSONS NOT ELIGIBLE TO OPT FOR COMPOSITION SCHEME The following persons cannot opt for composition scheme A person engaged in making any inter state supply A person engaged in supply of goods through an electronic commerce operator who is required to collect tax at source A person who is a manufacturer of the following notified goods - Ice Cream and other edible ice , whether or not containing cocoa - Pan Masala - Tobacco and manufactured tobacco substitutes - Aerated Water Casual Taxable Person and Non Resident Taxable Person
VALIDITY OF COMPOSITION LEVY Option valid till conditions satisfied Option lapses if turnover exceeds limit.
NO ENTRY INTO THE CREDIT CHAIN Not entitled to collect tax Seller and buyer not entitled to claim credit of taxes paid Reverse charge mechanism on inward supplies to be paid.
CONDITIONS AND RESTRICTIONS FOR COMPOSITION LEVY He is neither a casual taxable person nor a non resident taxable person. Stock has not been purchased from an unregistered supplier, where purchased , tax paid under reverse charge. He shall pay tax on Reverse charge basis on inward supplies. Words Composition Taxable Person , not eligible to collect tax on supplies has to be mentioned on the Bill of Supply . Words Composition taxable person to be displayed at prominent places.
