What are the differences between Composition & Regular GST Schemes?

What is Composition GST Scheme ?

The composition scheme is meant for small businesses whose turnover of taxable goods not more than ₹1.5 Crores, where GST must be borne by the seller @ 1% of such turnover by Traders, @ 2% by Manufacturers, 5% for Restaurants & 6% for Service Providers

The Composition taxpayer cannot issue a tax invoice, because the tax must be paid by the dealer out of pocket. A Composition Dealer is not allowed to recover the GST from the customers. Service Providers Cannot opt for Composition Scheme but in Budget 2019, Government announced to have Service providers whose turnover is up to Rs. 50L can opt for Composition Scheme

The Composition Scheme is very helpful to small businesses. Compare to regular GST scheme, the Composition taxpayers are required to file a total of 5 GST Returns ( i.e. Four Quarterly GSTRs in the form of CMP-08 & One annual GSTR in a year in the form of GSTR-4, GSTR-9A return was not yet declared). They cannot claim the Input Tax Credit on any purchases and are not required to maintain the books of accounts. 

 Advantages of Composition Scheme:

1. Less Tax & High Liquidity

2. Lower Tax Payment (Like 1%, 2%, 5%, 6%* )

3. Less Compliance involved in the Composition Scheme.

 Dis-Advantages of Composition Scheme:

1. Inter-State sales are not permitted.

2. Cannot collect the Tax Payment.

3. Few Taxpayers are preferred the Composition Scheme

What is Regular GST or Normal Scheme?

• Once Threshold limit of Rs 20 lakhs in Service turnover or 40L in Products turnover crosses the GST registration is required. A Registered Person, whose aggregate turnover in the preceding financial year did not exceed Seventy-Five (75L) Lakh Rupees for specified states * (see exception below) can choose this scheme. The taxpayers related to Service industry other than restaurant sector can also choose this scheme.

• The taxpayers registered under regular scheme must file returns monthly. Currently GSTR 3B and GSTR 1 are required to be filed, soon we are expected to file RET-1, PMT-8 from Apr 2020 in a staggered manner.

• Exception: List of states whose turnover limit is Rs. 75L are

  1. Arunachal Pradesh

  2. Manipur

  3. Meghalaya

  4. Mizoram

  5. Nagaland

  6. Sikkim

  7. Tripura

  8. Uttarakhand

• Regular taxpayers can avail input tax credit of GST Paid on purchase of goods or services or both.