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 – narendramodi1234@gmail.com

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
What tax amount payable by GST dealer who issues tax invoice.
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%

SCENARIO – 3 / Where GST Rate is 18%
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What tax amount payable by Composition dealer who issues bill of supply.
Purchase value 70,00,000
GST 18% 12,60,000
Total 82,60,000
Sale value 89,78,261
Profit 7,18,261
Composition tax :
 1% of 89,78,261 = 89,783
What tax amount payable by GST dealer who issues tax invoice.
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
Composition tax :
1% of 97,39,130 = 97,391
What tax amount payable by GST dealer who issues tax invoice.
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%.

More Under Goods and Services Tax

2 Comments

  1. Sajid Ahmed says:

    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.

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