CA Vinod Kaushik
Concept of composition scheme:-
In order to minimize the compliance burden on small dealers a single tax rate is fixed at a low level which is directly linked with the turnover amount. The input credit is not allowed to these classes of dealers against purchases made and restriction is put on issuance of tax invoice. The rate of tax in the newly notified scheme is 5% on the turnover amount which seems to be on a very high side because tax rate on sweets and namkeen is also proposed to be reduced in annual budget 2016-17. In this article we will discuss each and every aspect of the scheme in detail including applicability of relevant forms.
Who is eligible under this scheme?
Conditions for availing composition scheme:-
Other important conditions of the scheme:-
Shifting from existing composition scheme:
The dealers who are presently covered in general composition scheme as per sub section 1 to 11 of section 16 and they are also covered in the class of dealers prescribed in this scheme has to mandatorily switch to this scheme by withdrawing from existing scheme by filing form DVAT-03. If these classes of dealers are not interested in composition scheme can file returns as per normal procedure. This option is time bound in law and need to be exercised mandatorily by 30th day of April 2016. The above provision can be explained with the help of an illustration where a small sweet shop having turnover up to 50 lakhs has already availed normal composition scheme and paying flat tax @ 1% of their turnover has to withdraw from this scheme and either avail new composition scheme and pay tax @ 5% or adopt the normal route and pay tax under section 3 of the DVAT Act, 2004.
Trigger points for withdrawal from scheme:-
In the following circumstances the dealers who have opted to pay tax under this scheme had to mandatorily withdraw from the scheme.
The scheme has been announced for the small dealers but the rate of tax has been fixed at a very high level which might not attract the dealers to join this scheme. To simplify the compliance burden for small dealers and make the scheme more attractive Govt. should reduce the rate of tax in the scheme.
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