Article explains meaning of Composition Scheme under GST, who can opt this scheme and who cannot opt this scheme, how to compute aggregate turnover , Tax Rate under GST Composition, penal provisions of non-compliance, Allowability of input credit on switching to Composition Scheme, Availability of Composition Scheme to a person engaged in Import / Export of Goods etc.
| Sl. No. | Question | Answer |
| 1 | What is Composition Scheme?
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Keeping in mind the ease of doing business, the Section 9 of the model GST Act provides composition scheme for small entrepreneur. An Eligible Registered Taxable Person (Hereinafter ‘Composition Taxpayer’), after obtaining approval, can pay tax on total aggregate turnover. Burden of compliance including periodic return filing, maintenance of prescribed records is reduced here.
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| 2 | Who can opt this scheme?
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A registered taxable person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt this scheme.
However, for availing this scheme prior approval from the appropriate GST authority shall be taken.
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| 3 | How aggregate turnover to be computed?
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Aggregate turnover shall include value of taxable and non taxable supplies, exempted and Export Supplies, but does not include Taxes levied under SGST/IGST.
Further, Aggregate Turnover shall be determined on pan India basis based on particular PAN No.
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| 4 | What is rate of tax?
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Rate of Tax shall be not less than two and a half percent in case of a manufacturer and one percent in any other case.
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| 5 | Can a taxable person, having Inter State sale, opt Composition Scheme? | No. |
| 6 | Can a Service Provider opt for Composition Scheme? | No. It is applicable to a manufacturer only. |
| 7 | Can a taxable person who opt composition scheme be allowed to collect tax from the recipient? | No. They can not collect Tax from the recipient. They have to pay the tax on their own. |
| 8 | Will reverse Charge mechanism apply here? | Yes. |
| 9 | As the Composition Taxpayer are not eligible to collect tax, who will bear the tax? | Tax shall be borne by the supplier who is opting the Composition Levy |
| 10 | Is there any requirement for availing approval from the authority for availing the scheme? | Is there any requirement for availing approval from the authority of state or central for availing the scheme? |
| 11 | What are the penal provisions of non-compliance? | If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under this scheme, such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty and the provisions of section 66 or 67, as the case may be, shall apply mutatis mutandis for determination of tax and penalty. |
| 12 | Can a Composition Taxpayer be allowed to avail Credit of eligible duties and taxes on inputs held in stock while switching over from composition scheme? | A composition taxpayer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed date subject to the following conditions: (i) such inputs and / or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said person is not paying tax under section 9; (iii) the said taxable person is eligible for input tax credit on such inputs under this Act; (iv) the said taxable person is in possession of invoice and/or other prescribed documents evidencing payment of duty under the earlier law in respect of inputs; and (v) such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. (2) The amount of credit under sub-section (1) shall be calculated in such manner as may be prescribed. |
| If a person making import/export of good, whether he is eligible to avail composition scheme?
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As definition of Intra State Supply of Goods under Section 4(1)of IGST Act,2016, specify the transaction made in course of import/export is excluded,then it is deemed to be an inter-state supply. Hence a person cannot avail composition scheme. |
Author Bio
Dear Sir,
Very nice explanation through the article about the composition scheme. However one thing i would like to add :
Answer to question No.3
Non-taxable supplies shall not be includible in aggregate turnover.
Answer to question No.10
No such answer has mentioned whether to dealt with the SGST Authority/CGST Authority.
Who will grant permission to taxpayer seeking composition scheme.