GST Composition Scheme for Services Sector

In line with the GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax Scheme. In order to implement the said decision of Goods and Service Tax Council, the Central Board of Indirect Taxes and Customs have issued a notification no. 2/2019-Central Tax (Rate) dated 7th March 2019.

Condition for Availment of Composition Scheme –

  • Aggregate turnover of the supplier should be INR 50 Lakhs or less in the preceding financial year.
  • The supplier should not be eligible to pay tax under section 10 (1) of the Act.
  • The supplier should not be engaged in making supply which is not leviable to tax.
  • The supplier should not be engaged in making any inter-state supply.
  • The supplier should not be a casual taxable person.
  • The supplier should not be a non-resident taxable person.
  • The supplier should not be engaged in making supplies through an e-commerce operator who is required to collect tax u/s 52.
  • The supplier should not be engaged in making supplies of following:

1. Ice cream and other edible ice, whether or not containing cocoa

2. Pan masala

3. All goods i.e. tobacco and manufactured tobacco substitutes

  • The supplier cannot collect any tax from the recipient of supplies.
  • The supplier cannot avail input tax credit of tax so paid.
  • The supplier, instead of a tax invoice, is required to issue a bill of supply.
  • The supplier opting to pay tax availing benefit of this notification is liable to pay tax under reverse charge basis on inward supplies at applicable rates.

To opt for this Composition Scheme a taxpayer has to file GST CMP-02 online by logging into the GST Portal. latest by 30th April, 2019.

In case business in new and a fresh registration is obtained, the Taxpayer can opt for composition scheme at time of registration in FORM GST REG- 01.

RATE OF TAX UNDER COMPOSITION SCHEME FOR SERVICES

Services Except Restaurant Service

SGST 3%

CGST 3%

IGST 6%

Restaurant Service

SGST 2.5%

CGST 2.5%

IGST 5%

The said scheme shall be applicable to both service providers as well as suppliers of goods and services, who are not eligible for the presently available composition scheme for goods.

A composition dealer cannot issue a tax invoice as they cannot charge tax from their customers. Hence, the dealer has to issue a Bill of Supply. The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.

A composition dealer pays GST on the following:

1. GST on supplies made.

2. Tax on reverse charge

A composition dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. An annual return GSTR-9A also has to be filed by 31st December of next financial year.

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3 Comments

  1. shanmukha says:

    whether printing services (cards and note books printing) and hotel tea & fast foods (preparation of food items) supplies can avail this composition scheme

  2. ASHOK KUMAR KANUNGA says:

    ALL REGISTERED PERSON (TRADING) PAYING TAX @ 1% U/S 10 OF CGST ACT ON GOODS, NOW HE WILL GET RENT ON RESIDENT PROPERTY–
    QUESTION
    1. ON GOODS PAYING TAX @ 1%
    2. CAN PAY 6% TAX ON RENT SERVICE
    3. IF YES, WHAT IS PROCESS TO ENABLE THIS SCHEME, NOTIFICATION 02/2019 DATED 7/3/2019 TURNOVER OF F.Y GOODS IS 30 LAKH ESTIMATED HOUSE RENT 6 LAKH PER YEAR. FOR THE YEAR F.Y. 2019-20

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