CA Umesh Sharma
Arjuna (Fictional Character): Krishna, For which reasons, Composition Scheme under the GST has been brought?
Krishna (Fictional Character): Arjuna, For Small taxpayers, it was very difficult to comply with provisions of Act and so many rules. To pay tax on normal rates was also difficult for them. Hence, the government has introduced the concept of Composition Scheme. There are some changes already made and some changes are going on in composition scheme, such a complicated and confusing situation this is.
Arjuna: Krishna, Who can opt for composition scheme?
Krishna: Arjuna, A taxpayer whose turnover is below Rs 1 crore can opt in for Composition Scheme. In case of specified states, the limit is Rs 75 lakh. In the 23rd meeting held by GST council on 10th November, the decision was taken that the limit of turnover for registration under Composition will be increased upto Rs. 2 Crore. But notification relating to that is not issued yet.
Arjuna: Krishna, what are the tax rates applicable to Composition Dealer?
Krishna: Arjuna, under the composition scheme, CGST and SGST together 2% of the turnover in case of a manufacturer and 5% of the services provided in case of a hotel owner and 1% of the turnover in case of others is charged. In the recent meeting, rates under composition scheme also discussed. In that 1% rate was recommended for both manufacturer and retailers but still the notification relating to that is not issued.
Arjuna: Krishna, What are the returns to be filed by a composition dealer?
Krishna: Arjuna, Composition dealers will have to file quarterly returns. A dealer is required to file a quarterly return in Form GSTR-4 by 18th of the month after the end of the quarter. . Also, an annual return GSTR-9A has to be filed by 31st December of next financial year. But due to technical difficulties, the due date of filing return for first quarter is extended from 18th October to 24th December.
Arjuna: Krishna, what are the limitations under the composition scheme?
Krishna: Arjuna, following are the limitations under the composition scheme:
1. No Credit of Input Tax for composition dealers
2. Composition dealers cannot do Inter-state business
3. Pay tax from own pocket
4. Strict Penal provisions
5. Supplier of services other than restaurant related services cannot opt for Composition scheme
6. The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business and on every bill of supply issued by him.
Arjuna: Krishna, what lesson the taxpayer should take from this?
Krishna: Arjuna, there is an option for small taxpayer to opt for Composition scheme to have lesser compliance but there are so many problems relating to that. Input tax credit also not available for them. Further as ITC is not available if purchase from Composition Dealer, other taxpayers do not prefer to purchase from them. Because of that, composition dealers are in dilemma that whether they are composition dealer or confusing dealer?