Article explains Advantages and disadvantages of Composition Scheme Under Goods And Services Tax, 2017 read with Rules related to GST Composition.

Sec 10 of CGST Act 2017 explains composition levy under GST, according to which a registered person who has opted for the scheme has to pay tax based on his turnover in the preceding financial year. The person opting for the composition scheme is called the composition dealer.

Purpose of introducing the Composition levy Scheme in the Indian Taxation Laws and the corresponding benefits to Small Tax Payers

Benefits of Composition Scheme Under GST

The Government of India has introduced the composition scheme for the benefits of the Small Tax Payers in order to minimize the burden of compliance and additional tax burden.  The basic reason to introduce such beneficial scheme to small tax payers is that the small tax payers has limited resources to meet all the expenses to comply with so many provisions and procedures laid down in the act.

Advantages to a Composition Dealer as compared to a Non Composition Dealer

√ Less Burden of Compliance

√ Less number of Returns have to be filed as compared to Normal Tax Payers i.e. Quarterly GSTR 4 has to be filed only against 3 returns of the normal tax payers

√ Single rate of taxes has to be levied as per the business and turnover threshold

√ Multiple HSN codes and Multiple rates need not to be referred everytime charging tax on the goods and services

√ No classification issue/s

√ Less no of records to be maintained as compared to normal tax payers

√ More ease of doing business as compared to normal tax payers

But as it is said that every coin has its two sides , so is the case with Composition Dealer. For availing so many benefits the Composition Dealer also has to forego some of the other advantages under the GST mechanism, such as-

Disadvantages to a Composition Dealer as compared to a Non Composition Dealer

– The foremost being the non availment of Input Tax Credit, as the composition dealer cannot issue tax invoice and the credit cannot eb claimed on Bill of Supply

– The scheme is applicable only to manufactures and restaurant services and not to other service providers

– The interstate sales cant be included in his business i.e. the composition dealer cannot do interstate sales. In case his business includes interstate sales , he cannot apply for composition scheme or have to undergo various other applicable provisions of the CGST Act/ rules.

Despite of some disadvantages, the composition scheme has been duly accepted by the masses. 938,165 entities have opted composition scheme in the latest data findings. It was an opposite reaction the scheme as earlier, a less than 11 percent entities were registered under the composition scheme. Both migrated and new taxpayers up to 31.03.2018.

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Qualification: CA in Job / Business
Company: M/s SML Isuzu Ltd
Location: Chandigarh, Chandigarh, IN
Member Since: 10 May 2017 | Total Posts: 43
CA Rubneet Anand B.Com, M.Com(Finance& Taxation), MBA(Finance & International Business- IMT Ghaziabad) [email protected] Deputy Manager (Internal Audit & Indirect Taxation)-M/s SML Isuzu Ltd Facebook Page- Corporate Prism-Consultation in Accounting & Corporate Managemen View Full Profile

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June 2021