CA Ujjwal Jindal
Since its introduction, GST has been into controversies. Many people found it unreasonable and for others it was just a new tax regime which was introduced in a hurry. The government kept on moving with the newly introduced tax system keeping the public along, listening to their concerns and making necessary timely changes/amendments.
One such change is the new composition scheme which came not as an addition to the earlier existing section 10 of the CGST Act, 2017, but through a notification dated 7th March, 2019 [Notification No. 2/2019 – Central Tax (Rate)].
Let‟s take a quick yet detailed look at what is this new scheme all about!
The new composition scheme was introduced for persons who were not eligible for the earlier Composition Scheme (under section 10 of CGST Act, 2017). Basically, it focuses upon the supplier of services, nonetheless, it also applicable to the supplier of goods.
* [First supplies shall include, for the purposes of determining eligibility of a person to pay tax under this notification, the supplies from the 1st day of April of a financial year to the date from which he becomes liable for registration but for the purpose of determination of tax payable under this notification shall not include the supplies from the 1st day of April of a financial year to the date from which he becomes liable for registration under the Act. This is provided for in the notification by way of an Explanation.
Let‟s illustrate this explanation.
Period | Particulars of Supplies | Eligibility Limit for the scheme | Tax Computation under the scheme | Comments |
2019 – April to July | Supplies by a service provider | 20 L(shall be considered) | (Shall not be considered) | Becomes liable for registration at the end of July, 2019 |
2019-August | Supplies by the same service provider | 30 L (shall be considered) | 30 L (shall be considered) | Opting for new composition scheme provided under N/N 2/2019 – CT (Rate) |
IMPACT | Eligible for the new composition scheme as aggregate turnover is 50 lakh | Tax @ 6% shall be payable on 30 lakh only |
Thus, the first supplies (of 20 L) shall be considered while determining the eligibility for the new composition scheme, however, the same shall not be considered while computing tax payable under the scheme.]
extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.
(This is similar to what was provided by CGST Amendment Act, 2018 [prior to its amendment, the same was provided by Order No. 1/2019 by CGST (Removal of Difficulty) Order, 2019].
Initially, the composition scheme was brought for manufactures and traders (except restaurant/catering service providers). However, in the contemporary India, the need for such a scheme was equally felt by the service sector which is also in itself a major contributor in economic development and GDP. Listening to the demand of the industry, the government notified the above scheme to benefit the service sector which was earlier liable to register under GST as soon as they crossed the threshold limit of 20 lakh. The scheme was introduced with a dual objection so as to provide for a relief measure to the small service providers and also to ensure increased compliance.
At last, let‟s see both the old vis. a vis. the new composition schemes at a glance.
Head | Composition Scheme under CGST Act (Old Composition Scheme – Section 10) | Composition Scheme through Notification [New Composition Scheme – N/N 2/2019 – CT (Rate)] |
Pay GST | As per notified rates (1% or 5%) | At the rate of 6% |
Aggregate Turnover | up to 150/75 Lakh | up to 50 Lakh |
Document for Supply | Bill of Supply | Bill of Supply |
Input Tax Credit | Not Available | Not Available |
GST Returns | Quarterly by 18th –
GST CMP-08 (for tax payment) Annually by 30th April – GSTR-4 |
Quarterly by 18th –
GST CMP-08 (for tax payment) Annually by 30th April – GSTR-4 |
Well explained in such understandable way… Thanks for the detailed info👍
Can a new restuarant avail the new composition scheme or will it be covered in the old scheme of 5% only? Thanks n Regards
Usually I never comment on articles but your article is so convincing that I couldn’t stop myself to say something about it. Very well explained in simplified language. You’re doing a great job, keep it up.
Look forward for more articles.
Very well elucidated, CA Ujjwal.
Keep it up👍👍
Great Job, Thanks for imparting knowledge.
Great Job!! Thanks for imparting your knowledge knowledge.