Composition Scheme under the GST
This scheme would be available only to certain eligible taxable persons. This scheme is specifically introduced by government to give relief to the small businesses. A similar concept is also present in state vat laws which government has followed in the GST law. The best part of this scheme is, this Scheme will be applicable for all goods. We have summarized provisions of composition scheme in FAQ’s form which would be really helpful :
Q1. What is Composition Scheme?
Ans. Composition scheme introduced by government for small businesses who can opt for this scheme and pay tax at nominal rate instead of 5%/12%/18%/28%
Q2. Who can opt for composition scheme?
Ans. Any person dealing in goods can opt for this scheme. Service providers are kept outside the scope of this scheme. However restaurant owner can opt this scheme.
Q3. Who cannot opt for composition scheme?
Ans. Following are the person cannot opt for this scheme:
1. Person making supply of goods which are not liable to GST 2. Person making inter-State outward supplies 3. Person making supplies through an e-commerce operator 4. Manufacture of notified goods 5. Would be applicable for all transactions under the same PAN 6.Person collecting GST 7. Person taking input tax credit
Q4. Will I have to make application for opting composition scheme?
Ans. Yes: Before exercising the option the taxable person should make an application in Form GST CMP-01 to pay tax under this scheme.
Q5. What if, I have opted for composition scheme at the time of taking GST registration?
Ans. If at the time of taking registration you have opted for composition scheme then it shall be considered as an intimation to pay tax under this scheme.
Q6. What are the possibilities in which such option can be exercised?
Ans. There are three possibilities in which such option can be exercised:
- Taxable Person migrating from existing registration to GST registration
- Taxable Person obtaining new registration under GST laws
- Taxable Person paying tax under normal levy in one financial year and wants to opt for composition scheme in next financial year, under the GST regime
Q7. What are the GST rates for composition scheme?
Ans. The rate of tax would be as under:
(a) 2% of the turnover in case of MANUFACTURERS.
(b) 5% of the turnover in case of Food/Restaurant Services.
(c) 1% of the turnover in case of other suppliers (like traders / agents)
Q8. What are the eligibilities to pay tax under composition scheme:
Ans. Only those taxable persons whose ‘aggregate turnover does not exceed Rs.75 lakh in the last financial year will be eligible to opt for the composition scheme.
Q9. How will issue the invoices if i opt composition scheme?
Ans. he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and
he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
Q10. Can I purchase goods from unregistered person under the composition scheme?
Ans. Goods held in stock by him have not been purchased form an unregistered person supplier and where purchased, he pay the tax under sub-section (4) of section 9
Q11. Will I have to file a fresh intimation every year for opting composition scheme?
Ans. No. You can continue to pay tax under this scheme without intimating every year.
Q12. What is the treatment for input credit availed when switching from normal scheme to Composition Scheme?
Ans. When switching from normal scheme to composition scheme, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day immediately preceding the date of such switchover. The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.