Composition Scheme under proposed Goods & Service Tax (GST)

TG Team 18 Apr 2017 8,178 Views 0 comment Print Goods and Services Tax | Articles, Featured

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CA Surendra Agrawal

Presently, several State Governments have provisions for payment of a Composition levy of VAT for specified small businesses which makes compliance of tax laws easier without having to maintain copious records, registers and returns.

Secrtion-10 Central Goods and Services Tax Act, 2017. contains provisions for Composition Scheme permitting the tax payer to opt for payment of GST as a fixed percent on turnover instead of paying tax under regular provisions of the law.

Applicability
1	Applicable to a registered Taxable Person	Eligible even if registered voluntarily
2	Having Aggregate Turnover < Rs.50 lakhs	Aggregate Turnover includes value of Taxable and Non-Taxable Supplies, Exempted and Export Supplies too. Does not include Taxes levied under GST and Value of Inward Supplies
2	Needs to make an application	Even where the person is under Composition under the current VAT law, it is advisable to make the application under GST
4	Will need to pay taxes at usual rates on RCM, if applicable	Reverse Charge Mechanism u/s 7(3) would apply even for such persons
Restrictions/Limitations
1	Cannot effect Inter State Supplies	However, Inter State purchases are permitted
2	Aggregate Turnover to be computed across all Business Verticals and across the country for each PAN number	Aggregate Turnover determined on pan India basis, for the respective Income Tax PAN no.
3	The person is not permitted to collect GST	GST has to be borne by the person out of the Sale proceeds
4	Person shall not be entitled to Input Credits under GST	Unlike persons under regular scheme, set-offs are not permitted
5	Law provides for additional conditions to be prescribed
Ease of doing business
1	Quarterly Returns	As against 3 to 4 returns monthly
2	Lower rate of Tax	Specified at not less than 1%. Expected to be in the region of 1% to 3%
3	In place of a Tax Invoice the document required is a Bill of Supply	Convenient since details required are not as much
4	Presently, several State VAT laws permit composition, but not available for services	Big boon to Service Providers since the Input Tax payment is negligible