composition scheme under GST & Recent due date extension

Extension of Date to file the GST Return under the Composite Dealers till August 31, 2020

The Central Board of Indirect Taxes and Customs have issued Notification No. 59/2020–Central Tax dated 13th July, 2020 extending the deadline for filing GSTR-4 annual returns for 2019-20 by composition dealers from July 15 to August 31. The Government has extended the due date for filing annual return by compensation dealers for 2019-20 till August 31, 2020.

What is the composition scheme under GST?

 To ensure wide coverage of the GST Act among the business community, a new scheme commonly known as a GST compensation scheme that could be elected by any taxpayer who doesn’t intend to widen his/her business. Thus, small businessmen can choose the scheme that is hassle-free and contains fewer formalities and could be chosen by any businessman up to a certain extent of limit.

Who can opt for Composition Scheme?

Such taxpayers having turnover below the amount of 150 lakhs (1.50 crores) may choose to be taxed under the Composition Scheme. But, in the case of North-Eastern states and Himachal Pradesh, the limit is equal to 75 lakh.

Who cannot opt for the Composition Scheme?

Following persons cannot opt for the composition scheme under the Act-

1. Person manufacturing goods like ice cream, pan masala, or tobacco;

2. Such a person making inter-state supplies;

3. A casual taxable person or a non-resident taxable person;

4. Businesses supplying goods through an e-commerce operator;

What are the restrictions under the composition Scheme?

a. No Input Tax Credit could be availed for a dealer availing the scheme of composition;

b.  Such dealer shall not supply goods exempted under  GST exempt;

c.  He has to pay GST at normal rates for transactions under the Reverse Charge Mechanism;

d.Where such a taxable person has businesses in more than one segment (such as textiles, electronic accessories, groceries, etc.) possessing the same PAN card, he must either register all the businesses under the scheme jointly or leave the scheme.

e. Such a taxpayer has to compulsorily mention the words ‘composition taxable person’ on such every official publication and he must mention ‘composition taxable person’ on every” bill of supply “issued instead of a receipt.

How to choose a composition scheme?

A taxpayer intending to avail the scheme of composition, such a taxpayer has to submit the form GST CMP-02 on the GST portal and could be filed by logging online on the portal. However, the intention of electing the scheme should be made given at the commencement of every financial year by a dealer.

What are the common GST rates for a composition dealer?

Some of the common rates of GST include-

Business Type	CGST	SGST	TOTAL
1.Manufacturers and Traders(dealing in Goods)	0.5%	0.5%	1%
2.Restaurant’s (not serving Alcohol)	2.5%	2.5%	5%
3.Other Service Providers	3%	3%	6%

How can a GST dealer make payment under the Composition scheme?

As per the provisions under the GST scheme, a composite dealer cannot receive the amount of tax from its customer; he necessarily needs to make such from his pocket.

Usually, such GST payments made by a composition dealer include the following:

1. GST on supplies made;

2. Taxes paid  on reverse charge basis;

3. Purchases made from an unregistered dealer under GST.

Which GST returns are needed to be filed by a composition dealer?

Unlike any dealer normally registered under GST provisions who have to file as multiple returns in a year (i.e. monthly and annual return), a composite dealer has to file only a quarterly return in form GSTR-4 up to 18th of the month after the end of the quarter. Additionally, an annual return GSTR-9A has to be filed by 31st December of the next financial year.

Conclusion

Thus, the extension of date to file quarterly return till August 30 has come as a sign of relief for the composite dealers who are already facing problems still complying with other provisions of the composition scheme, and the lockdown has created further slow down with their businesses.

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