The GST tax system has provided a big relief for those small traders, who trade goods locally and most of them are one man army, who in the course of business procure the goods for sale, do marketing and look after all affairs of their business venture himself. The Central Board of Excise and Customs have issued certain Notifications on 19th June, 2017. One of the important Notifications was Noti. No. 03/2017-Central Tax dated 19th June, 2017, which has prescribed the procedure and other formalities for observance by a registered person intent to opt for COMPOSITION Scheme of GST. Basically, this scheme is designed for the traders, whose turnover was note more than 75 lakhs in the preceding financial year (Rs. 50 Lakh for NE and hill states). This scheme envisaged lesser compliances as the return is to be filed on quarterly basis. The highlights and basic procedure of the scheme can be summarized as under:
1. The person, who is duly provisionally registered under Section 24 and intent to opt for composition levy scheme under Section 10, shall electronically file intimation to this effect in FORM GST CMP-01on the common portal. Such declaration is to be filed within 30 days of appointed day. Thus, the GST CMP-1 is to be filed on or before 21st July, 2017.
2. The person opting for this scheme is not to collect any tax from the recipient of the supply and he is required to issue Bill of supply towards the supplies he makes.
3. The person obtaining registration under sub-rule (1) of rule 8 may give an option in part B of GST REG-01 that he would pay tax under Section 10 and such option given would be considered as intimation under the said Section.
4. Various forms and return relating to COMPOSITION Scheme are as under :
| Form Required to be filled in | Due date of submission | Purpose |
| GST CMP-01 | Within 30 days of appointed day | To opt for Composition Scheme by provision registration holder |
| GST CMP-02 | Prior to commence of a financial year | Intimation to opt for scheme. |
| GST CMP -03 | Within 60 days of exercising of option | Details of stock and inward supplied from unregistered person. |
| GST CMP -04 | Within 7 days happening of event | Intimation towards withdrawal of scheme |
| GST REG-01 | Prior to appointed day (i.e. before 1st July, 2017) | Registration |
| GST GSTR-4 | 18th of the month after the quarter. Say for Jul-Sep, 2017 quarter the due date shall be 18th Oct, 2017 | Quarterly Return. |
| GST ITC 01 | 30 days of opting out of the scheme | Details of inputs in stock (also semi-finished and finished) |
| GST ITC -13 | Within 60 days of commencement of financial year | Intimation towards available Input Tax Credit. |
5. Other major conditions for a person operating under COMPOSITION scheme are :
a) The goods held in stock are not purchased by him from an unregistered person and if purchased, the tax is required to be paid under reverse charge mechanism (RCM).
b) He is required to issue bill of supply instead of invoice and the such bill should bear the words “composition taxable person, not eligible to collect tax on supplies”
c) He is not permitted to make inter-state supply since all inter-state supplies are taxable.
d) An e commerce marketplace seller is specifically excluded from this scheme irrespective of his turnover.
e) The goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 3. Thus, the stock held with him as on 1.7.2017 should not have been purchased or brought by him from other state, or imported one etc.
f) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section (4) of section 9;
g) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both;
h) he is required to file annual return and before filing such annual return his accounts are required to be audited.
i) The rate of GST under the scheme are as under:
| Category of registered person | Rate of Tax |
| Manufacturer (except manufacturer of notified goods like pan masala) | 2 % ( 1 % SGST + 1 % CGST) |
| Supply of food or other articles for human consumption except alcoholic liquor | 5 % ( 2.5 % SGST + 2.5 % CGST) |
| Others (like common retailer) | 1 % ( 0.5 % SGST + 0.5 % CGST) |
The scheme has some disadvantage such as the person working under Composition scheme is not entitled to avail any input tax credit and at the same time pay tax at the prescribed rates. Thus, tax paid on inputs and tax paid on supplies both are expenditure to him. For more details Notification No. 03/2017-Central Tax dated 19th June, 2017 can be referred.
Author Bio
We are dealing in Medical shop items, which is best to us either Composition or regular reg ?
If we opt for composition Scheme are we eligible to claim a input credit, which we paid on items which we bought under vat
(New reg case)
Sir, A dealer regular registered under VAT migrated in GST opts for composition & has closing stock of RD, is he has to reverse ITC of Cl.st.
A Dealer (Not registered earlier under the Old Laws) wants to NEWLY register for Composition Scheme under GST. He has some stocks which have Invoices from Registered Dealer under Old Act (VAT) and stocks from un-registered dealer also.
Now if he wants to register for Composition Scheme –
(i) Is he required to mention details of these stocks in registration Application?
(ii) Is he required to pay tax on these stocks from Un-registered Dealer on RCM basis?
(iii) If he is required to pay Tax on these stocks of URD on RCM basis, then where and in which form these details are required to be disclosed?
What is the Treatment of Purchase Returns and Sales returns in Composition Schme