The debate which kicked off quite some time back whether the GST composition scheme would bring smile or tears is still a burning topic today. Of course, there are several elements which make composition scheme shine and GST governing Council is fine-tuning it in every meeting.
What is GST Composition Scheme?
The GST framework has specific provisions with respect to GST registration under composition scheme. The key principle which underlines the composition scheme is minimizing the compliance burden for the small taxpayers. It is expected that around 8 million taxpayers would migrate to GST. Although, most of these taxpayers would have a very limited turnover and might not have the required expertise for complying with the procedures laid down in the GST regime.
The GST composition Scheme is an easy and simple scheme for the taxpayers. Small taxpayers could get rid of the tedious tax formalities and can pay GST at a pre-determined rate of turnover. Any taxpayer with a turnover of less than INR One crore could opt for GST registration under composition scheme. This scheme is designed with the objective of making compliance cost effective and easier for the taxpayers.
Benefits of GST Composition Scheme
The composite taxpayers need to provide only their total sale instead of a bill wise summary and aren’t required to reconcile their purchase invoices, they are required to pay a fixed percentage of their sales. Limited compliances would allow the small business owners to focus on their business and would save a lot of their time, energy and effort.
Another key benefit of GST registration under the composition scheme is the tax rate for the taxpayer which is nominal. The GST regime offers nominal and minimal tax bindings on the taxpayers opting for composition scheme, which is its key USP. Overall, a taxpayer under the composite scheme can strengthen his bottom line with lesser compliances.
It’s no true, that the composition scheme would weaken your business proposition. In fact, it would give a small business owner an opportunity to extend his footprints into local as well as farfetched markets by offering them a competitive pricing. For, an ambitious small businessperson, this scheme might act as a propellant and stir growth.
Just because the taxpayer has chosen the composition scheme, it doesn’t mean that he would lose the competitive edge. As profit margin of the supplier in the composition scheme is higher as compared to a large taxpayer, the supplier could outplay economies of scale of the large business entities by offering their goods and services at competitive prices and gain a better hold on the market supply. Hence, GST composition scheme safeguards the interest of the small suppliers and provides them with an opportunity of competitive and sustainable supply market.
The Bottom Line
Therefore, it could be said that GST composition scheme would be a growth catalyst for the small taxpayers. In spite of certain drawbacks, the GST composition scheme is a novel initiative as it promises to enhance the business environment in India and would also help create several job opportunities.
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018