“Change is the law of the universe”- Shrimad Bhagwat Geeta

In case of GST Universe is moving speedily that’s why recurrence modification happens in GST law. After the launch of GST on July, 01 2017 the Government has kept itself open for changes in GST for the benefit of the taxpayer. For the promotion and ease in compliance of MSME Service sector government take a big step by issue said notification. But there is some key point which surely adverse effect for this scheme like bring section 9(4) of CGST.

After 1.4.2019 we have 2 types of compositions scheme one for goods and another for service-

On 07-03-2019 government introduced a new GST Composition scheme by Notification No. 02/2019 of CGST (rate) 2017 with a new rate for the service sector. This notification is effective from 1.4.2019.

1. Let’s start with how this scheme brings in force by the government. Government exercise his power under section 9(1), section 11(1) and 16(1) of the Central Goods and Services Tax Act, 2017.

  • Section 9(1) permits to the government to levy and collection tax on all intra-state supplies whether it is goods or service or both.
  • Section 11(1) said Government can exempt whole or any part of tax leviable by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both.
  • Section 16(1) talk about the government can put any restrictions or condition on credit of input.

As you can see government not directly interduce this scheme as a composition but govt first levy on tax, after levy on tax provided some exemption then restrict by putting some condition (same as composition) the input.

2. primarily condition for that registered person should not be qualified for section 10(composition scheme) by putting this condition government ensure this scheme precede the composition scheme. First, we always need to check that registered person is disqualified for composition. Let’s understand with examples –

3. one of the major differences and con between this scheme and composition is section 9(4). If you go for this scheme you have to pay tax on unregister purchase without claiming the input that’s too harsh and one of the key reason taxpayer does not want and try to avoid this scheme. By putting this condition maybe government may indicate that in future government may notify section 10(composition scheme) under 9(4).

4. This notification brings one more tax rate of 6% (3% CGST and 3% SGST). Before the introduction of Gst, in India there are so many taxes like service tax, entertainment tax, vat, toll tax etc were levied on goods. These taxes were different in different states, but after the introduction of Gst, there is only one tax into India. with multiple tax rates So the GST is really one nation and not one tax.

5. The taxpayer selected this scheme need to issue Document “Bill of supply” with the top of document taxpayer required to mention ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies.’

Here is our comparison Analysis of said notification and composition scheme.

particulars Notification- 2/2019 Composition U/S 10
Enforcement By notification By section 10 of CGST
Turnover limit Not more than 1.5 cr Not more than 50 lakh
Supply type Services Goods
RCM 9(3) and 9(4) 9(3)
Rate of tax 6% 1% & 5%
Mention at the top of BOS “taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies” “composition taxable person, not eligible to collect tax on supplies”

 some key point parallel to composition-

1. Computing aggregate turnover in order to determine eligibility of a registered person to pay central tax at the rate of three percent under this notification, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be considered.

2. Restriction on the following supply-

  • Inter-state supply
  • Electronic commerce operator who is required to collect tax at source under section 52
  • Who is not engaged in specified supplies of the goods

3. The registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

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Qualification: CA in Practice
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Location: Jaipur, Rajasthan, IN
Member Since: 07 Nov 2017 | Total Posts: 4

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June 2021