Changes in GST Composition Levy w.e.f. 1st April, 2019

A. GST Composition Scheme Provisions Before 1st April 2019:-

i. The threshold turnover limit

• For Trader, Manufacturer – Rs. 1 Crore
• For Restaurant Service Only – 1 Crore

ii. Rate of Tax under GST Composition Scheme

• For Trader, Manufacturer – 1%
• For Restaurant Service– 5%.

iii. For Services, other than restaurant scheme –No composition scheme

iv. However, Trader/Manufacturer can provide services to the extent of ten percent of turnover subject to maximum Rs. 5 lacs

B. GST Composition Scheme Provisions after 1st April 2019:-

i. The threshold turnover limit

• For Trader, Manufacturer – 1.5 Crore
• For Restaurant Service – 1.5 Crore
• The Threshold limit in any of the following States, namely: (i) Arunachal Pradesh, (ii) Manipur, (iii) Meghalaya, (iv) Mizoram, (v) Nagaland, (vi) Sikkim, (vii) Tripura, (viii) Uttarakhand is Rs.75 lakhs.

ii. The Rate of GST under composition scheme-

• For Trader, Manufacturer –1% (5% CGST plus 0.5% SGST)
• For Restaurant Service – 5% (2.5% CGST plus 2.5% SGST)
• For Other Service Providers whose turnover in the preceding Financial Year Rs. 50 lakhs – 6% (3% CGST & 3% SGST)

C. Applicability of GST Composition Scheme-

• Not engaged in making any supply which is not leviable to tax under the CGST Act.
• Not engaged in making any inter state outward supply.
• Neither a Casual Taxable Person nor a Non Resident Taxable Person
• Not engaged in making any supply through an e-commerce operator who is required to collect tax at source under section 52
• Shall not collect any tax from the recipient on supplies made by him nor shall be entitled to any credit of ITC
• Shall issue Bill of Supply instead of Tax Invoice.
• Composition dealer is not eligible to collect tax on supplies
• The composition taxpayer will file GSTR-4.

D. Composition Scheme for 2019-20

The registered persons need to file GST CMP 02 viz Intimation to opt for composition scheme- before 31st March 2019, the deadline, to opt in for Composition levy for FY 2019-20

E. Notifications on Composition Scheme

i. Notification No. 2/2019-Central Tax (Rate) dated 7^th March, 2019

• First supplies of goods or services or both up to an aggregate turnover of fifty lakh rupees  made on or after the 1st day of April in any financial year, by a registered person Shall be liable to pay central tax at the rate of three percent on all outward supplies (Total 6%)
• The CGST Rules, 2017, as applicable to a person paying tax under section 10 of the said Act shall, mutatis mutandis, apply to a person paying tax under this notification.

• Conditions:
• Not engaged in making any supply which is not leviable to tax under the CGST Act
• Not engaged in making any inter-State outward supply
• Neither a casual taxable person nor a non-resident taxable person
• Not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52
• Shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
• Shall issue, instead of tax invoice, a bill of supply  as referred to in section 31(3)(c) of the CGST Act with particulars as prescribed in rule 49 of CGST Rules.
• The registered person shall mention the following words at the top of the bill of supply, namely: – ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.
• Shall be liable to pay central tax on inward supplies on which he is liable to pay tax under Section 9(3) or 9(4) of CGST Act at the applicable rates.

Explanation:

“First supplies of goods or services or both” shall, for the purposes of determining eligibility of a person to pay tax under this notification, include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the said Act but for the purpose of determination of tax payable under this notification shall not include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the Act.

ii. Removal of Difficulty Order No. 3/2019-Central Tax dated ₈th March, 2019

• The provisions of Section 31(3)(c) of the CGST Act, 2017 shall apply to a person paying tax under Notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 (Composition Scheme for Services)
• Section 31(3)(c) provides for issue of bill of supply by composition taxpayers. Thus, instead of a tax invoice, a bill of supply will be issued by a person opting for composition scheme for services.

iii. Notification No. 9/2019-Central Tax (Rate) dated 29th March, 2019

Where any registered person who has availed of input tax credit opts to pay tax under this notification, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods as if the supply made under this notification attracts the provisions of section 18(4) of the said Act and the rules made there-under and after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.