Composition Scheme under GST was earlier available to only the Suppliers of goods. However, in 32nd GST Council Meeting, it has been recommended that the scheme shall be made available to service providers too. The scheme for service providers is available from 1 April 2019 .
The composition scheme for service providers gives an option to taxpayers rendering services having aggregate annual turnover in preceding P.Y. was Rs. 50 lakh or below to pay tax at a nominal rate, i.e. 6% (3% CGST and 3% SGST) subject to conditions.
The following persons can opt into this scheme:
1. Supplier of services only (i.e., service providers)
2. Suppliers of goods and services (i.e., those suppliers who were not eligible for composition scheme earlier,)
1. The supplier of service must have a turnover of less than or equal to Rs. 50 lakh in the previous financial year.
2. The supplier is not eligible for to pay tax under sub section (1) of section 10 of the said act.
3. The supplier should not be supplying any goods which is not leviable to tax under the gst act.
4. The supplier should not be engaged in making inter-state supplies.
5. The supplier should not supply through an e-commerce operator (u/s 52).
6. The supplier should not be a casual taxable person or non-resident taxable person.
7. The supplier must issue a bill of supply instead of a tax invoice. The supplier must mention the words ‘composition taxable person’ (taxable person paying tax in term of notification no. 2/2019-central tax (Rate) dated 07-03-2019, not eligible to collect tax on supplies) on the bill of supply.
8. The supplier cannot charge and collect tax from the customer.
9. The supplier cannot claim the input tax credit.
10. The supplier must pay normal tax for reverse charge supplies (RCM).
11. The supplier cannot be supplying ice cream and other edible ice, whether or not containing cocoa, pan masala and tobacco and manufactured tobacco substitutes.
12. Where any registered person who has availed of input tax credit opts to pay tax at 6%. Then he shall follow the sec 18(4).(i.e. registered person opt for composition scheme he should pay ITC availed on goods held in stock, capital good etc.)
Exclusion for determining eligibility of aggregate turnover of Rs 50 lakh
Notification no. 2/2019 central tax (rate) provide that
1. Value of exempts service by way of extending deposits, loan or advances where the income is represented by way of interest or discount, shall not be taken into account.
EXTRACT FROM 32nd GST Council Meeting
Compliance Simplification: The compliance under Composition Scheme shall be simplified as now they would need to file one Annual Return but Payment of Taxes would remain Quarterly (along with a simple declaration).
Higher Exemption Threshold Limit for Supplier of Service:
The Threshold for Registration for Service Providers would continue to be Rs 20 lakh and in case of Special Category States at Rs 10 lakh.
Composition Scheme for Services: A Composition Scheme shall be made available for Suppliers of Services (or Mixed Suppliers) with a Tax Rate of 6% (3% CGST +3% SGST) having an Annual Turnover in the preceding Financial Year up to Rs 50 lakhs The said Scheme Shall be applicable to both Service Providers as well as Suppliers of Goods and Services, who are not eligible for the presently available Composition Scheme for Goods.
They would be liable to file one Annual Return with Quarterly Payment of Taxes (along with a Simple Declaration).