Composition Scheme was introduced for small taxpayers, so that they can get rid of tedious GST formalities and pay indirect tax at a fixed rate of turnover.
♦ Eligibility :-
1. It is an optional scheme available to taxable person, Taxable person can opt for the scheme if aggregate turnover is upto Rs. 1.5 crore in the preceding financial year.
2. However, the aggregate turnover in the preceding financial year shall be Rs. 75 lakh in any of the following states :-
Special Category States
♦ How to Compute Aggregate turnover
Following are inclusions and Exclusions from “Aggregate turnover” :-
|Value of all outward supplies i.e.
❖ Taxable Supplies
❖ Exempt Supplies
❖ Inter-State Supplies
Of persons having Same PAN to be computed on all India basis.
❖ Value of all inward supplies on which tax is payable under Reverse Charge.
♦ Rates under composition scheme
|S.No.||Eligible Person||Rate of tax cannot exceed (% of turnover)||Total rate of tax cannot exceed|
|(a)||Manufacturer||0.5% of turnover in State/UT||0.5% of turnover in State/UT||1% of turnover in State/UT|
|(b)||Restaurant Service||2.5% of turnover is State/UT||2.5% of turnover is State/UT||5% of turnover is State/UT|
|(c)||Other Supplies||0.5% of turnover of taxable supplies of goods & services in State/UT||0.5% of turnover of taxable supplies of goods & services in State/UT||1% of turnover of taxable supplies of goods & services in State/UT|
♦ Whether taxable person opting for composition scheme can also supply services? (second Proviso to section 10(1))
Person who opts to pay tax under composition scheme may supply services of value :-
(a) Not exceeding 10% of turnover in a State/UT in the preceding financial year or
(b) Rs 5,00,000
Whichever is higher.
♦ Who are not eligible to opt for composition scheme
Broadly 5 categories of registered persons are not eligible to opt composition scheme :-
(i) Supplier of services other than those mentioned above.
(ii) Supplier of goods which are not taxable under CGST Act/ SGST Act/ UTGST Act.
(iii) Person engaged in making Inter-state Supply of goods
(iv) Person supplying goods through an E-Commerce Operator who is required to collect tax at source u/s 52.
(v) Manufacturer of certain notified goods
– Ice-cream and other edible ice, whether or not containing cocoa
– Pan Masala
– Aerated waters
– Tobacco & manufactured tobacco substitutes
♦ Other Important Points
> Option to pay under composition scheme lapses as and when aggregate turnover crosses Rs 1.5 crore/ 75 lakh
> Composition tax cannot be collected from recipients, as it is a benefit provided to supplier by lowering the rates.
> ITC cannot be availed by composition supplier.
> In case of irregular availment, registered person shall be liable to pay tax and also be liable for penalty
> Composition scheme is not applicable on supplies on which tax is payable under RCM.
> Customers are not entitled to take credit of tax paid under composition scheme.
> Supply of exempted services by way of extending deposits, loans or advances in so far as consideration is represented as interest or discount shall not be taken into account
♦ Presumptive Scheme For Services Suppliers and Mixed Suppliers
> Conditions for opting Presumptive Scheme
“Taxable person paying tax in terms of notification No. 2/2019-CT (Rate) dates 07-03-2019, not eligible to collect tax on supplies”.
|Description of Supply||Rate of tax cannot exceed (% of turnover)||Total rate of tax cannot exceed|
|First supplies* of goods or services upto an aggregate turnover of Rs 50 lakh made on or after the 1st day of April in any F.Y.||3% of aggregate turnover in the State/UT||3% of aggregate turnover in the State/UT||6% of aggregate turnover in the State/UT|
* First Supplies
> Restrictions under Presumptive Scheme
♦ Form and Manner of submission of statement and returns
> Registered person paying tax u/s 10 or as per notification No.02/2019-CT(R) dated 07-03-2019 shall electronically furnish –
> Return furnished shall include invoice-wise inter-state and intra-state inward supplies received from registered and unregistered person and consolidated details of outward supplies made.