Introduction: The Composition Scheme under the Central Goods and Services Tax (CGST) Act is a simple tax scheme designed for small businesses and service providers with a turnover of up to Rs. 1.5 crore per annum. This scheme simplifies the tax compliance process and reduces the tax burden for small businesses. In this article, we will discuss the Composition Scheme in detail, including Composition tax rate, GST Forms, and composition rate for service providers.
Composition Scheme Eligibility: To be eligible for the Composition Scheme, a taxpayer must meet the following conditions:
Note: in Recent Budget, the sellers supplying goods intra-state via E-Commerce Operators can also opt for composition but subject to some conditions .The changes to the law will be done post release of notification (Notification yet to come)
Composition Tax Rate: Under the Composition Scheme, the taxpayer is required to pay a fixed percentage of their turnover as tax instead of paying tax under the regular GST regime. The Composition tax rate varies for different categories of taxpayers, as follows:
GST Forms under Composition Scheme: The following are the GST Forms that a taxpayer registered under the Composition Scheme needs to file:
Composition Rate for Service Providers: The Composition Scheme for service providers was introduced under the CGST Amendment Act, 2018, with effect from 1st April 2019. Under this scheme, service providers are required to pay a fixed percentage of their turnover as tax. The composition rate for service providers is 6% of turnover. However, the following types of service providers are not eligible for the Composition Scheme:
Conclusion: The Composition Scheme under the CGST Act is a simplified tax scheme for small businesses and service providers with a turnover of up to Rs. 1.5 crore. This scheme reduces the tax compliance burden for small taxpayers and encourages them to comply with GST regulations. The Composition tax rate and GST Forms vary for different categories of taxpayers. Small businesses and service providers should carefully evaluate the eligibility criteria and benefits of the Composition Scheme before opting for it.
Author CA. Bhavik P. Chudasama can be reached at email@example.com
Disclaimer: We request readers to seek professional advice before arriving at any decision/conclusion after reading. We are not responsible for any loss arising to anyone after referring and relying on this article. Above views are based on our understanding of the provisions.