COMPOSITION SCHEME UNDER GST

by Madhav Joshi

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Posted on June 4, 2019

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Composition scheme is a simple and easy scheme for small traders and business in GST. Amitbhai Patel, a small-time trader in Madhupura Market of Ahmedabad. His business turnover was  ₹48.37 lakhs last year and due to demonetization, he doesn’t expect his turnover for this financial year to be more than ₹55 lakhs.
He deals with numerous traders and manufacturers and now in GST, it has become tough for him to handle the taxation and accounting. Many of his suppliers and vendors don’t have an organised structure of business due to their small operations. His main customers are irregular and small time buyers. They usually hail to small towns of Gujarat & Rajasthan.
So, it’s better for him to opt for composition scheme under GST. This will give him ease of doing business accounting as well much time for return preparation without worrying much of paying tax.

Who can opt composition scheme

Business dealing only in goods and Taxpayer that turnover is below 75 lakhs and above 20 lakhs can opt composition scheme. For North-East states and Himachal Pradesh – the turnover value is below 50 lakhs and above the 10 lakhs.

Except

1. Supplier of service other than restaurant services
2. Non-resident
3. E-commerce operator
4. Manufacturing of pan masala, tobacco, ice cream etc.

Condition for availing Composition scheme

1. No Input tax credit
2. Taxpayer can make only intrastate supply
3. Dealer cannot supply of exempted goods
4. Taxpayer has to mention the word ‘composition taxable person’ on every bill of supply and mention on the notice or signboard displayed at place of business
5. Taxpayer has to pay the normal rate under reverse charge mechanism

GST Rates for composition scheme

• 1% for traders and suppliers
• 2% for Manufacture
• 5% for restaurant services on turnover

Payment of tax or filing of return on Quarterly basis

Benefit of composition scheme

1. Only record the total sales and inward supply no need to mention the invoice details
2. No need to collect tax from buyer normal billing
3. No need to collect GST from customer then boost the net profit
4. It is beneficial to all the B2C business
5. One return in every 3 months(quarterly) in GSTR-4

Penalties

In case Composition dealer has wrongly availed benefit under composition scheme. Then it shall be liable to pay all the tax which it would pay under normal scheme and penalty is equivalent to the amount of tax payable.

Transition from normal scheme to composition scheme

Its eligible for CENVAT Credit under such good of the previous regime
Eligible for Input tax credit
Legal evidence of input tax paid

Return filling in composition scheme

GSTR-4 is furnished for composition scheme in quarterly basis on 18th of the month after the end of the quarter.

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