CA Abhijit Dongaonkar
To be, or not to be, that is the question: Whether to get befitted as Composition dealer Or to become a regular taxpayer?
To deal with RCM only, to deal with RCM, matching of ITC, tax on advance payment and transition & so on;
When we have shuffled off this mortal coil, Must give us pause—there’s the respect That makes calamity…………
Like Hamlet musing, we tend to compare between options of becoming taxpayer under Composition Scheme or to become regular taxpayer with all jargons like transition, matching concept and Reverse Charge Mechanism, which in either case seems to be inevitable and the fear of the uncertainty of various provisions & section of GST and its impact on business…
Let’s understand one side of the coin…. the Composition scheme
What is Composition Scheme?
Act has provided simplified methodology of levy for small taxpayer, the composition levy. The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers.
How it Works?
Small taxpayer has an option to pay tax on gross turnover calculated at following percentage, in lieu of the regular tax rate payable by him:
|Sr No||Category of Registered Person||Rate of Tax|
|1||Manufacturer except Ice-crème, Pan Masala, Tobacco||1% CGST+ 1 %SGST|
|2||Restaurants||2.5% CGST + 2.5% SGST|
|3||Traders or any other person (Except Services)||0.5% CGST + 0.5% SGST|
Taxpayer has to intimate option of Composition levy through Common Portal as follows:
|Sr No||Category of Registered Person||How to Opt||Time Limit||Effective Date of scheme|
|1||Exiting VAT/Excise Registered person migrating to GST||Form GSTCMP-01 &
|Prior to 22nd June 2017 or upto 16th Aug 2017 Within 60 days from date of exercising option||1st July 2017|
|2||Person getting first time registered under GST Law||Part B of FORM GST REG-01||At the time of applying for new registration||Date of starting of business|
|3||Any Registered person||Form GSTCMP-02 and FORM GST ITC-03||Prior to commence of financial year Within 60 days from commencement of financial year.
|Beginning of financial year|
Composition dealer will not collect tax on his outward supply and accordingly recipient goods of will not avail input tax credit on such purchases.
Eligibility Conditions for compositions levy
Aggregate turnover for this scheme will be calculated on all India bases and will includes value of all taxable supplies, exempt supplies and exports, but would exclude inward supplies under reverse charge.
What are Restrictions?
Transition to GST Composition Scheme
Exiting VAT/Excise & Service dealer intended to opt for composition scheme shall be required to comply with following:
What are the Benefits of the Scheme?
Intent of scheme is that dealer shall deal only in tax paid goods, thus no relief is provided to composition dealer towards compliance of Reserve Charge Mechanism on purchases from unregistered dealer.
No relaxation in maintenance of Accounts and Records to Composition dealer except for getting books of accounts audited from CA or Cost Accountants and submission of Reconciliation statement.
Withdrawal from the Scheme
Scheme also given exit route, which can be opted through application in FORM GST CMP-4 on common portal.
If dealer opts for exit route and become regular tax payer, he will be entitled to take credit of input tax in respect of following by filing statement in FORM GST ITC-01:
Credit of capital goods shall be calculated on pro-rata basis and shall be reduced to the extent of use of asset considering useful life of asset as 5 years.
Withdrawal from scheme in one location shall be automatically applicable for all other place of business.
Validity of Scheme:
Option exercised for Composition scheme shall be valid if:
If dealer options become invalid due to breach of any of above conditions, he has to intimate through common portal in FORM GST CMP-4 within 7 days from date of becoming ineligible.
Like Hamlet’s, dilemma in our mind will be continued mainly due to restriction imposed by the scheme:
Moto of the GST is open market through-out the country; however, for composition dealer restriction like no inter-state sales, no supply of services and non-use of e-commerce platform will work as entry barrier.
It is said that “The grass is always greener on the other side of the fence” thus we can keep exploring other side of the fence till 16th Aug 2017 before deciding on composition scheme.
Applicable Sections, Rules and Notification:
Applicable Sections of CGST Act: Sec 10- Composition Scheme, 17(5)(e)-Blocked Credit, 18(1)( c)- ITC in case of exit, 18(4)- Reversal of ITC , 31(3) (c)-Invoicing , 35- Accounts & Records 39( 2)-Furnishing of Returns
Rules: 3-7-Composition Scheme, 49- Rules for Bill of Supply, 56- Maintenance of Accounts, 62- Returns, 85- Payment of taxes
Forms: GSTR-4- Quarterly Return, GST CMP-01- Migration of Exiting Tax Payers, GST CMP-03, Part B of FORM GST REG-01, GSTCMP-02, GST ITC-03, GST CMP-4, FORM GST ITC-01
Notifications: 01/2017 (CGST)- Appointed date, 03/2017 (CGST) –Composition Rules 08/2017(CGST)- Turnover limit