Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate on turnover. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore.
A taxpayer whose turnover is below Rs 1.5 Crore can opt for Composition Scheme. Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.
Taxpayer Supplier of services other than restaurant related services
Manufacturer of ice cream, pan masala, or tobacco
Casual taxable person or a non-resident taxable person
Businesses which supply goods through an e-commerce operator
No Input Tax Credit can be claimed by a dealer opting for composition scheme
The taxpayer cannot make any inter-state supply of goods.
The dealer cannot supply GST exempted goods
Taxpayer has to pay tax at normal rates for transactions under Reverse Charge Mechanism
If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
A composition dealer cannot issue tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket.
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.
GST payment has to be made out of pocket for the supplies made.
The GST payment to be made by a composition dealer comprises of the following:
GST on supplies made.
Tax on reverse charge
Tax on purchase from unregistered dealer.
Lesser compliance (returns, maintaining books of record, issuance of invoices)
Limited tax liability
High liquidity as taxes are at a lower rate
A limited territory of business. The dealer is barred from carrying out inter-state transactions
No Input Tax Credit available to composition dealers
The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.
A dealer is required to file a quarterly return by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year.
Also, note that a dealer registered under composition scheme is not required to maintain detailed records.
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