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CA Surendra Agrawal
Presently, several State Governments have provisions for payment of a Composition levy of VAT for specified small businesses which makes compliance of tax laws easier without having to maintain copious records, registers and returns.
Secrtion-10 Central Goods and Services Tax Act, 2017. contains provisions for Composition Scheme permitting the tax payer to opt for payment of GST as a fixed percent on turnover instead of paying tax under regular provisions of the law.
| Applicability | ||
| 1 | Applicable to a registered Taxable Person | Eligible even if registered voluntarily |
| 2 | Having Aggregate Turnover < Rs.50 lakhs | Aggregate Turnover includes value of Taxable and Non-Taxable Supplies, Exempted and Export Supplies too. Does not include Taxes levied under GST and Value of Inward Supplies |
| 2 | Needs to make an application | Even where the person is under Composition under the current VAT law, it is advisable to make the application under GST |
| 4 | Will need to pay taxes at usual rates on RCM,
if applicable |
Reverse Charge Mechanism u/s 7(3) would apply even for such persons |
| Restrictions/Limitations | ||
| 1 | Cannot effect Inter State Supplies | However, Inter State purchases are permitted |
| 2 | Aggregate Turnover to be computed across all Business Verticals and across the country for each PAN number | Aggregate Turnover determined on pan India basis, for the respective Income Tax PAN no. |
| 3 | The person is not permitted to collect GST | GST has to be borne by the person out of the Sale proceeds |
| 4 | Person shall not be entitled to Input Credits under GST | Unlike persons under regular scheme, set-offs are not permitted |
| 5 | Law provides for additional conditions to be prescribed | |
| Ease of doing business | ||
| 1 | Quarterly Returns | As against 3 to 4 returns monthly |
| 2 | Lower rate of Tax | Specified at not less than 1%. Expected to be in the region of 1% to 3% |
| 3 | In place of a Tax Invoice the document required is a Bill of Supply | Convenient since details required are not as much |
| 4 | Presently, several State VAT laws permit composition, but not available for services | Big boon to Service Providers since the Input Tax payment is negligible |
CA SURENDRA AGRAWAL
(M.com,LLB,ACA)
For Any Inquiry Call/Mail To PH-9313336776 Email-ca.surendra@gmail.com
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