GST: Small taxpayers can opt for composition scheme before July 21

Small businesses with turnover of up to Rs.75 Lakh are eligible to avail the composition scheme under the goods and services tax regime. Any person who has been granted registration on a provisional basis and has turnover not exceeding Rs.75 Lakh, and who wishes to opt for the composition levy, is required to electronically file intimation at the GST portal on or before 21 July 2017. Under composition scheme, traders, manufacturers and restaurants can pay tax at 1%, 2% and 5%, respectively in the new indirect tax regime. Businesses opting for composition scheme will see a lesser compliance burden as they will have to file returns only once in a quarter as against monthly returns to be filed by other businesses.

Conditions / Consequences

  • In the case of the following States, the limit of aggregate turnover for composition scheme is Rs. 50 lakhs:-  Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh.
  • Following persons are not allowed to opt for the composition scheme:
  1.  A casual taxable person or a non-resident taxable person;
  2. Suppliers whose aggregate turnover in the preceding financial year crossed Rs. 75 lakhs;
  3. Supplier who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis;
  4. Supplier of services, other than restaurant service;
  5. Persons supplying goods which are not taxable under GST law;
  6. Persons making any inter-State outward supplies of goods;
  7. Suppliers making any supply of goods through an electronic commerce Operator who is required to collect tax at source.
  8. A manufacturer of following goods:

-        Ice cream and other edible ice, whether or not containing cocoa

-        Pan Masala

-        Tobacco and manufactured tobacco substitutes

  • Aggregate turnover will be computed on the basis of turnover on an all India basis and will include value of all taxable supplies; exempt supplies and exports made by all persons with same PAN, but would exclude inward supplies under reverse charge as well as central, State/Union Territory and Integrated taxes and cess.
  • A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed
  • As the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme cannot avail credit.

Compliances

  • ·A person opting for composition levy will have to pay tax and electronically file quarterly returns in Form GSTR-4 before 18th of the month succeeding the quarter during which the supplies were made
  • The option to pay tax under composition scheme lapses from the day on which his aggregate turnover during the financial year exceeds the specified limit (Rs. 75 lakhs /Rs. 50 lakhs). He is required to file intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days from the day on which the threshold limit has been crossed.
  • A person paying tax under the composition scheme can issue a bill of supply in lieu of tax invoice.
  • If a person opting to pay tax under the composition scheme receives inputs/input services from an unregistered person, tax will have to be paid on such supplies by the composition taxpayer under reverse charge mechanism.
  • Such person is required to furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts to pay tax under the composition scheme, electronically, in FORM GST CMP-03 within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.
  • A person making application for fresh registration under GST can opt for composition levy at the time of making application. Such persons can give the option to pay tax under the composition scheme in Part B of FORM GST REG-01. This will be considered as intimation to pay tax under the composition scheme.
  • In case a person has registration in multiple states, the option to pay tax under composition scheme will have to be exercised for all states.
  • Such persons shall mention the words "composition taxable person, not eligible to collect tax on supplies" at the top of the bill of supply issued by him; and he shall mention the words "composition taxable person" on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
  • The registered person will not be able to carry forward the excess ITC of VAT to GST if he opts for composition scheme.

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