The Objective of Composition scheme under the GST Act, is to simplify the procedural compliance’s, particularly for the Small Tax Payers and pay GST at a Fixed rate of Turnover. The finance ministry has notified the changes decided by the GST Council, chaired by Union finance minister Arun Jaitley, held on 10th November 2017. The Government, announced various measures to reduce the GST burden on the Common man. In this Article, let us understand some common questions around Composition Scheme considering the changes made:

1. What is GST composition Scheme?

  • This scheme is for the Small Business who cannot maintain the detailed books of Accounts and Records.
  • Normally, an Assesse under GST is required to maintain the proper books of accounts for Output and Input, and is supposed to file 3 monthly returns every month and 1 Annual return which makes it too cumbersome. For such Business, Government introduced an option to avail Composition Scheme to make compliance easy.
  • As per the Scheme, No ITC is available and the assesse shall pay output tax at the lower rate.
  • Also, instead of monthly returns, the assesee shall file Quarterly return and an Annual return.

2. Who can opt for GST Composition Scheme?

  • Small Taxpayers with an Annual Turnover up to Rs. 1.5 Crore can opt for Composition Scheme
  • Composition scheme is open for manufacturers, restaurants and traders whose turnover does not exceed Rs1.5 crore.
  • Those supplying goods and services (services not exceeding Rs.5 Lakhs in total) can opt for composition scheme.

The composition scheme is levied for all the business verticals with the same PAN.

Person can now opt for composition scheme till 31st March 2018.

3. Who cannot opt for the GST Composition Scheme?

  • Business with Turnover more than Rs. 1.5 Crore.
  • Taxable Person who is engaged in providing Services.
  • Taxable person who makes Interstate outward supply of goods
  • Taxable person who makes any supply through E-commerce operator
  • Taxable person who makes any supply of goods which are not leviable to Tax like Alcohol, Petrol, diesel etc
  • Taxable person who is engaged in Services businesses, manufacturers of pan masala, ice-cream, tobacco and tobacco substitutes.

4. Rate of GST Composition levy

Nature of Taxpayer CGST SGST Total
Manufacturers and Traders (Goods) 0.5% 0.5% 1%
Restaurant (Not serving Alcohol) 2.5% 2.5% 5%

The Notification stipulates that the Manufacturers shall now pay 1% GST as against 2% earlier.

Besides, the definition of the turnover for the Traders has been defined as “Turnover of Taxable Supplies of Goods” (i.e. turnover of the exempted goods to be excluded)

5. Restrictions under the GST Composition Scheme

  • Composition dealer shall not collect tax from recipient of service.
  • Composition Dealer is not allowed to avail input tax credit (ITC) of GST on purchases.
  • Composition dealer shall not make Inter-State outward supplies: but, he can make Inward Inter-State Supplies.
  • Composition Dealer cannot issue a Tax invoice, instead has to issue Bill of Supply.

6. Reversal of Input Tax credit if the taxable person switches over from Regular scheme to GST Composition scheme

  • Where any person, who has availed ITC, switches over to composition scheme, he shall pay an amount, by way of debit in the Electronic ledger or the cash ledger, equivalent to ITC in respect of the goods on the day immediately preceding the date of such switch over (calculated in the prescribed manner)-
  • Inputs held in stock
  • Inputs contained in semi-finished or finished goods held in stock, and
  • Capital goods, as reduced by such percentage points as may be prescribed

The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.

7. Eligibility of the Input Tax credit where a taxable person, who was paying tax under the GST composition scheme, starts paying tax under the regular Scheme.

  • Such person will be entitled to take credit of Input tax in respect of the following goods held on the day immediately preceding the day from which he becomes liable to pay tax under regular scheme-
  • Inputs held in stock
  • Inputs contained in semi-finished or finished goods held in stock, and
  • Capital goods, as reduced by such percentage points as may be prescribed

ITC shall, however not be available in respect of supply of goods/services to him after the expiry of 1 year from the date of issue of tax invoice relating thereto calculated in the prescribed manner.

Also, Check out composition scheme under gst.

8.  Extended Deadlines for filing GST returns

  • GSTR 3B along with the payment of tax need to be filed by 20th of the next month till march 2018.
  • Extension of Due date of filings of GSTR 1:

For Turnover up to Rs. 1.5 Cr:

Period (Quarterly) Due Date
July- Sept 31st Dec 2017
Oct-Dec 15th Feb 2018
Jan- Mar 30th April 2018

For Turnover above Rs. 1.5 Cr

Period (Month) Due Date
July- Oct 31st Dec 2017
Nov 10th Jan 2018
Dec 10th Feb 2018
Jan 10th March 2018
Feb 10th April 2018
March 10th May 2018

GSTR 2 and GSTR 3 return has been suspended till further notice from the Government.

  • GSTR 4 is to be filed on Quarterly basis

The due date for filing GSTR 4 is 18th of the month following the quarter.

Period Due date
July- Sept 24th Dec 2017
Oct- Dec 18th Jan 2018
Jan- March 18th April 2018

9. Reduction in late fee for GST returns

When a GST return is filed after due date, late fee is applicable.

The government has reduced the late fees for GSTR-1, GSTR-3B, GSTR-4, GSTR-5, GSTR-5A and GSTR-6 as follows (until further notifications late fees will remain the same).

Revised late fee:

Particulars Late fee
Normal Return (GSTR-1, GSTR-3B, GSTR-4, GSTR-5, GSTR-5A and GSTR-6) Rs. 50 per day of Delay
Nil Return (GSTR-1, GSTR-3B, GSTR-4, GSTR-5 and GSTR-5A) Rs. 20 per day of Delay

The maximum late fee can be charged is Rs. 5000.

The government has waived late fees for GSTR-3B from July to September 2017. Any late fees paid for these months will be credited back to Electronic Cash Ledger under Tax.  This can be later utilized for payment of GST Liability

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Qualification: CA in Practice
Company: Bhojwani & Co. , Chartered Accountants
Location: Bangalore, Karnataka, IN
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  1. CA vandana p says:

    Hi, If a trader or manufacturer supplies services as allowed in amendment act then how will we calculate tax on such services? what will be the rate of GST applicable on these services provided by them?

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