Taxation system of any kind requires several compliances which need to be adhere by the taxpayers to ensure fulfillment of all statutory provisions. Provisions include timely payment of taxes, filing of returns and maintaining prescribed records are essential for complying under taxation system. However, for making compliance’s easier for small businesses, many state governments have provided in their VAT system for payment of a composition levy by small businesses. On the same Line, GST laws also provide a composition scheme for small businesses. The GST Composition Scheme will make compliance of new tax laws i.e. GST hassle free for eligible businesses opting for the scheme.
Section 10 of the GST law contains the provision with respect to the registration of a taxpayer under the composition scheme. The basic fundamental principle behind the composition scheme is to minimize the burden of compliances for small taxpayers. In our country there are number of small businessmen those are self dependent, these prospective taxpayers of new regime of indirect taxation have limited resources, Knowledge and expertise to comply with all the mandatory procedures mentioned under the GST law.
Hence the government has provided composition scheme wherein any taxpayer whose turnover is below Rs 75 lakhs (as amended by the 16th GST Council meeting held on 11th June, 2017 earlier it was 50 lakhs) may opt not to register as a normal taxpayer. Instead, he may choose to get registered as a taxpayer under composition scheme and pay taxes on his supplies at a very nominal rate. However, he shall not be eligible to issue a tax invoice and also would not be able to utilize the credit of input tax already paid by him on his purchases.
Registration under Composition Scheme
Any existing taxpayer not under Composition Scheme may choose to opt for it (subject to being qualified), only from the beginning of the next Financial Year. The application will have to be filed on or before 31st March of the Previous Year so that returns can be filed accordingly. Dealers under Composition Scheme may be allowed to switch over to normal scheme even during the year if they wish to do so. However, they cannot switch over to Composition Scheme again during the same Financial Year.
Who Can Opt Composition Scheme
Who cannot opt for composition scheme even if there turnover is below 75 Lacs.
Hence these persons will not be eligible to take registration under Composition scheme in GST.
The GST Council in its meeting held on 18th June, 2017, has recommended that the turnover limit for Composition Levy for CGST and SGST purposes shall be Rs.50 lakh in respect of the following Special Category States i.e Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Himachal Pradesh, However The Council has also recommended that in case of Uttarakhand, the turnover limit for Composition Levy for CGST and SGST purposes will be Rs.75 lakh.
Returns under Composition Scheme:
A registered taxable person paying tax under the provisions of Composite Scheme shall furnish a return for each quarter in prescribed form in prescribed manner within eighteen days after the end of relevant quarter. GSTR-4 has been prescribed by the government as a tax return form to be filed by a dealer under Composition Scheme. The registered person shall make payment of tax no later than the last date on which he is required to file the return. Composition dealers need to furnish the first return for the period starting from the date on which they become a registered taxable entity till the end of the quarter in which the registration has been granted.
Returns to be furnished for every tax period whether or not any supplies of goods or services or both have been made during such tax period. Proper officer may cancel the registration from such date, including any retrospective date if the person opting for composition scheme does not furnish return for three consecutive tax periods i.e. three quarters. (Sec 29(2) (b)). The registered person shall furnish one annual return in FORM GSTR-9A for every year
Tax Rate under Composition Scheme:
Applicable Tax Rate under scheme of Composition will be as follow:
|SR. No.||Particulars||GST Rate|
|1||Manufacturer-other than manufacturer of goods notified by Government||2% (CGST+SGST)|
|2||Food/restaurant services- other than alcoholic liquor for human consumption||5% (CGST+SGST)|
|3||Any other eligible supplier like Trader/agent||1% (CGST+SGST)|
Salient features of the Composition scheme under GST:
Limitations of GST Composition Scheme
Large Business entities usually have all the required resources and expertise that can facilitate the complex legal compliance procedures. On the other hand, small and medium size enterprises, and start-ups will have to face difficulty in complying with these provisions due to lack of resources and adequate mechanism.
Hence, to lower the burden of compliances for small businesses, this composition scheme will be very beneficial for these classes of taxpayers, where they just have to pay tax at a minimum nominal rate based on their aggregate turnover. Earlier also to make compliances better for small business Houses, respective states have provisions in their Local VAT law about the composition scheme. Similarly in GST, composition scheme is introduced to safeguard the interests of small businesses.
Hence we may conclude that, GST composition scheme is introduced to safeguard the interests of small businesses. Composition Scheme under new tax regime will be quite beneficial to small traders, Small Suppliers, intra state local suppliers and restaurant sector as it prevents them from various Lengthy procedural compliances and gives a hassle free working environment.