Satyanarayan Kabra
Composition tax rate under GST Law required to be changed in comparison of GST slab rates
MOST IMPORTANT OPEN LETTER
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For the kind attention of :
1. Honorable Prime Minister, Government of India – [email protected]
2. Finance Minister, Government of India
3. Revenue Secretary, Government of India
Subject : Composition tax rate under GST Law required to be changed in comparison of GST slab rates.
Dear Sirs,
GST Law has been implemented and Composition tax rate has been fixed 1% for traders. This rate is very high or very low in comparison of GST slab rates. Therefore, composition tax rate is required to be fixed taking into consideration the GST slab rates of 5, 12, 18 and 28%. I give here under examples that how composition tax gives loss / profit to traders who have opted composition scheme. For all examples, purchase figure is assumed Rs. 70,00,000 and profit margin is assumed 8% presumptive as per Income Tax Act.
SCENARIO – 1 / Where GST Rate is 5%
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What tax amount payable by Composition dealer who issues bill of supply.
| Purchase value | 70,00,000 |
| GST 5% | 3,50,000 |
| Total | 73,50,000 |
| Sale value | 79,89,130 |
| Profit | 6,39,130 |
| Composition tax: 1% of 79,89,130 = | 79,891 |
| Sale value | 76,08,695 |
| GST 5% | 3,80,435 |
| Total | 79,89,130 |
| Tax collected | 3,80,435 |
| Less Input tax credit | 3,50,000 |
| Tax payable | 30,435 |
Loss to Composition dealer :
79,891 – 30,435 = 49,456
So the composition tax rate for this slab of 5% is required to be changed from 1% to 0.5%.
SCENARIO – 2 / Where GST Rate is 12%
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What tax amount payable by Composition dealer who issues bill of supply
| Purchase value | 70,00,000 |
| GST 12% | 8,40,000 |
| Total | 78,40,000 |
| Sale value | 85,21,739 |
| Profit | 6,81,739 |
Composition tax :
1% of 85,21,739 = 85217
What amount taxable by GST dealer who issues tax invoice.
| Sale value | 76,08,696 |
| GST 12% | 9,13,043 |
| Total | 85,21,739 |
| Tax collected | 9,13,043 |
| Less Input tax credit | 8,40,000 |
| Tax payable | 73,043 |
Loss to Composition dealer :
85,217 – 73,043 = 12,174
So the composition tax rate for this slab of 12% is required to be changed from 1% to 0.85%
| Purchase value | 70,00,000 |
| GST 18% | 12,60,000 |
| Total | 82,60,000 |
| Sale value | 89,78,261 |
| Profit | 7,18,261 |
| Sale value | 76,08,696 |
| GST 18% | 13,69,565 |
| Total | 89,78,261 |
| Tax collected | 13,69,565 |
| Less Input tax credit | 12,60,000 |
| Tax payable | 1,09,565 |
Profit to Composition dealer :
1,09,565 – 89,783 = 19,782
So the composition tax rate for this slab of 18% is required to be changed from 1% to 1.25%.
SCENARIO – 4 / Where GST Rate is 28%
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What tax amount payable by Composition dealer who issues bill of supply.
| Purchase value | 70,00,000 |
| GST 28% | 19,60,000 |
| Total | 89,60,000 |
| Sale value | 97,39,130 |
| Profit | 7,79,130 |
| Sale value | 76,08,695 |
| GST 28% | 21,30,435 |
| Total | 97,39,130 |
| Tax collected | 21,30,435 |
| Less Input tax credit | 19,60,000 |
| Tax payable | 1,70,435 |
Profit to Composition dealer :
1,70,435 – 97,391 = 73,044
So the composition tax rate for this slab of 28% is required to be changed from 1% to 1.75%.
Please consider the above facts seriously and give another deepavali gift specially to traders who trade in products covered by GST slab rate of 5%.
Composition Scheme gives the Time Limit only to the Tax Payers. Not any thing else.
You are right to take the voice, and call for a solutions to the traders. Thanks.
This will again complicate the GST system and not acceptable