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CA Umesh Sharma

CA Umesh SharmaArjuna (Fictional Character): Krishna, is there composition scheme for small traders in GST?

Krishna (Fictional Character): Arjuna, Yes, in GST, to give relief to the small traders from paying GST as per the rates specified and other compliance, they can pay GST on the gross turnover. Further taxpayer either opt for the composition scheme or pay GST by normal method.

Arjuna: Krishna, who can opt for composition scheme in the GST?

Krishna: Arjuna, as per GST rules, following persons can pay tax under composition scheme.

  1. If in the last financial year, aggregate turnover is less than Rs. 50 lakh
  2. If goods or services come under the purview of GST
  3. Taxpayer cannot purchase goods or services from other state. i.e. interstate Purchases
  4. Cannot supply goods or services through electronic commerce operator.

Arjuna: Krishna, What will be the rate of tax for composition scheme in GST?

Krishna: Arjuna, as per provisions of composition scheme, the rate of GST for manufacturer is CGST 1% & SGST 1% total 2%, for retailer CGST 0.5% & SGST 0.5% total 1% and for hotels CGST 2.5% & SGST 2.5% total 5%. Ex. If the annual aggregate turnover of Stationery taxpayer is Rs. 30 lakh, then as per provision, he will have to pay CGST @ 0.5% Rs. 15,000/- and SGST @ 0.5% Rs. 15,000/- total Rs. 30,000/-.

Arjuna: Krishna, What are the conditions for composition scheme in GST?

Krishna: Arjuna, Composition scheme taxpayer cannot collect GST from the customers. Further, he cannot take set-off of GST of the goods and services purchased from registered person.

Arjuna: Krishna, can a registered person choose one area from three business work areas for composition levy scheme?

Krishna: Arjuna, The composition scheme applies to all business of the person having single PAN. Ex. If a person having single PAN has two different businesses of Medicines & Mobiles, then he has to opt for composition scheme for both the businesses. Composition scheme for mobiles business & for medicine other scheme cannot be opted.

Arjuna: Krishna, What one have to do for opting composition scheme?

Krishna: Arjuna, Taxpayer has to electronically get registered for composition scheme within 30 day after the GST becomes applicable. Taxpayer cannot collect GST on the sales made by him. Further he will have to issue “Bill of Supply” to the customers and mention “Composition Taxpayer Person, not eligible to collect tax on supply” on it.

Arjuna: Krishna, when return will have to be filed by person registered under composition scheme?

Krishna: Arjuna, person registered under composition scheme have to file return after quarter before 18th day of succeeding month in Form GSTR 4A. Similarly, he will have to file annual return before 31st December after the end of financial year.

Arjuna: Krishna, what one should learn from this?

Krishna: Arjuna, Every small trader should choose composition scheme by analyzing his nature of business. In this taxpayer cannot collect tax on sales and cannot take set-off on the purchases. Further, returns will have to be filed quarterly and there will no issues of mismatch. In any manner the taxpayer will have to pay tax. Every small trader should take decision for composition scheme by analyzing in this way.

Author Bio

1. Central Council Member of ICAI. 2. Vice-Chairman of WIRC of ICAI for the period 2015-2021. 3. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 4. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNEETI” published in Lokmat on every View Full Profile

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  1. SN aggerwal says:

    Comments good, but it is not clear if small
    manufacturer whose turn over is below 20 lacs and sells within state can opt for composition scheme His product is currently taxable @ 5.5%

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April 2024