COMPOSITION SCHEME

Composition scheme for small tax payers business who's an aggregate turnover is up to 100 lakhs can opt the composition scheme and pay tax on the gross turnover on a fixed rate of percentage however a person who opt composite scheme can't avail the benefit of input tax credit.

Currently, manufacturers, traders and restaurants (supplying non-alcohol drinks) can opt for the GST composition scheme. The rate of tax rate prescribed under the composition scheme is 1% (0.5% CGST and 0.5% SGST) for manufacturers and traders, and 5% (2.5% CGST and 2.5% SGST) for restaurants. Before October 2017, the prescribed rate of tax under this composition scheme for manufacturers was 2% (1% CGST and 1% SGST), and for traders and restaurants, the rate was same 1% (0.5% CGST and 0.5% SGST).

RESTRICTIONS ON PERSONS REGISTERED UNDER COMPOSITION SCHEME

• Such person can't make inter-state sales.
• Such persons shall not be entitle to input tax credit. Net tax payable =Turnover multiplied by Composition Rate
• Such person also breaks the input credit chain so it also can't pass the input tax credit. In other words if another dealer purchases goods/services from composition dealer then such dealer also can not take input tax credit. So composition scheme is not suitable for wholesalers and B2B businesses.
• Such person can't charge composition tax separately in the invoice issued.
• Such person can't make sales through any e-commerce portal like Amazon or Flipkart.
• Such person is liable to pay tax on purchases of goods or services from un-registered persons and on import of services under reverse charge. Such tax is be calculated using the normal GST rates and CGST and SGST will apply even if purchase is from outside state.
• Such person should mention the words "composition taxable person, not eligible to collect tax on supplies" at the top of the bill of supply issued by him.
• Such person 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.

GST RATES UNDER COMPOSITION SCHEME

GST RETURN AND PAYMENT

A Persons in composition scheme are required to file quarterly returns and pay GST on quarterly basis. And the normal registered person is required to file monthly return and make payment on monthly basis.

Due date for return filing and also for GST payment is 18 days of the following of the quarter. Such quarterly return is to be filed in Form GSTR-4 and the details of input supplies will be made available in Form GSTR-4A.

An annual return is also to be filed in Form GSTR-9A on or before 31st December after the end of the financial year.

Disqualification and Penalty

If tax authorities believe that a business is wrongfully enrolled or not eligible, they may disqualify the business from the composition scheme or demand a penalty equal to the tax amount owed. In case of late filing of GSTR-4, the business owner will be fined Rs. 100 per day to a maximum amount of Rs. 5,000/-. Also, not furnishing returns for 3 consecutive tax periods may result in cancellation of registration by the tax authorities.

FAQ ?