GST composition scheme for 2020 21 

 GST Composition Scheme 

GST composition scheme is a tax-paying machine offered to small businesses. Small taxpayers can get free of serious GST formalities and pay GST at a fixed rate of turnover. This scheme can be selected by any taxpayer whose turnover is less than Rs. 1.5 crore.

1. Who comes under GST Composition Scheme

A taxpayer whose aggregate turnover is below Rs 1.5 crore can opt for the Composition Scheme. In the case of North-Eastern states and Himachal Pradesh, the limit is below Rs 75 lakh.

As per the CGST (Amendment) Act, 2018, a composition dealer can also provide services to an amount of ten percent of turnover, or Rs.5 lakhs, whichever is higher. from the 1st of Feb, 2019 This amendment will be applicable. Further, GST Council in its 32nd summit proposed an increase to this limit for service providers on 10th Jan 2019.

Turnover of all businesses registered with the same PAN should be taken into examination to calculate turnover.

2. Who cannot select for GST Composition Scheme

The following people cannot select for the scheme-

• Manufacturer and trader of ice cream, pan masala, or tobacco
• A person making inter-state supplies
• both casual taxable or a non-resident taxable person
• Businesses whose  goods supply through an e-commerce operator

3. What are the situations for availing of the GST Composition Scheme?

The following situation must be satisfied in order to select for GST composition scheme:

• No Input Tax Credit can be claimed by a dealer  selecting  for GST composition scheme
•  GST exempted goods cannot supply by the dealer.
• The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge machine.
• In case a taxable individual has various types of businesses (such as textile, etc.) under the same PAN, they should register every such business under the scheme accordingly or select out of the scheme.
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed highly at their place of business.
• on every bill of supply, the taxpayer should mention the words ‘composition taxable person’  while issued to him.
• As per the CGST (Amendment) Act, 2018, a manufacturer now supply services to an end of 10% of turnover, or Rs.5 lakhs, whichever is highest. From the 1st of Feb,2019 This amendment will be applicable.

4. How can a taxpayer select for GST composition scheme?

To select for composition scheme a taxpayer has to file GST CMP 02 with the government. simply by logging into the GST Portal.

This intimation should be given at the starting of every Financial Year by a dealer wanting to select for GST Composition Scheme.

5. How Should a Composition Dealer raise bill?

A composition dealer cannot issue a tax invoice.  The tax cannot charge from their taxpayer. Composition dealers need to pay tax out of their own pockets.

Hence, the Bill of supply is issued by the dealer.

The seller ought to likewise make reference to  “composition taxable individual, not qualified to gather tax on supplies”  at the highest point bill of Supply.

6. GST rates for a composition dealer:

7. How should GST payment be created by a composition dealer?

GST Payment has to be paid by the composition dealer for the supplies made.

The GST installment to be paid by a composition dealer contains the following:

• GST on supplies made.
• Tax on reverse charge.
• Tax on obtaining from an unregistered dealer.
• Only on the predetermined categories of goods and services and well as the informed class of enrolled people with impact from 1st Feb 2019 but is yet to be advised. Hence, not applicable up to that point.

  8. What are the merits of the GST Composition Scheme?

The following are the merits of registering under the GSTcomposition scheme:

• smaller compliance (returns, maintaining books of record, issuance of invoices)
• Limited tax liability
• High cash flow as taxes are at a lower rate

9. What are the drawbacks of the GST Composition Scheme?

Let us now see the drawbacks of registering under the GST composition scheme:

• A limited territory of business. The dealer is banded from carrying out inter-state transactions
• No Input Tax Credit useful to composition dealers
• The taxpayer will not be eligible to supply discharged goods or goods through e-commerce.
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Mohit Bisht

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