GST

What is the Composition scheme under GST?

Ans. There is a provision of composition scheme under GST under Section 10. Any Person whose aggregate turnover (Taxable + Exempted) in preceding financial year did not exceed 75 Lac (50 Lakh for special category states), then that person can apply for registration under composition scheme.

Further, if in case a taxable person has different business segments (like Textile, Grocery etc) having same PAN as held by the taxable person, he must register all such businesses under the scheme. Hence, all the business under one PAN should opt for Composition scheme.

If cross the limit of 75 Lakhs in current year then can I continue with composition scheme for rest of the year?

Ans. No, The option of composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs.75 Lakhs. In such cases, the person has to file form GST CMP-04 within 7 days intimating withdrawal from composition scheme

Is there is any exception for any class of business entity who cannot enroll in composition scheme?

Ans. Actually, apart from the criteria of 75 Lakhs, there is a list of persons who cannot opt for composition scheme even if there turnover is below 75 Lakhs. They are:

i) Any service provider except restaurant service

ii) Person dealing in goods which are not covered under this act like Liquor

iii) Person having interstate supply

iv) Person supplying through e-Commerce operator

v) Person manufacturing goods as notified by government

If I have to opt the composition for only one of my business, then can't opt it?

Ans. Yes. Your all business under one PAN should go for composition. It is not possible to register one entity in composition and another as normal using one PAN.

What are the rates in Composition scheme?

Ans. In GST, there is no single rate for Composition dealers. The rates in GST for composition dealers is dependent on nature of dealer. The rates are as follows:

• Manufacturers : 1%
• Specific service provider i.e. restaurant service : 2.5%
• Any other dealer : 0.5%

Are these the final rates?

Ans. These rates for CGST act and similarly there will be SGST/UTGST rates. Hence, the final composition rates will be total of CGST and SGST rates. For example, if in Rajasthan GST also the composition rate is 1% for manufacturers then the total composition rate for manufacturer will be 2% (CGST+SGST).

Also, instead of monthly returns, there are quarterly returns in composition scheme which makes this scheme easier form the point of view of compliance.

What are the invoice formats for Composition dealers in GST?

Ans. Under GST, every Composition dealer shall issue a bill of supply for sales. In that bill of supply, he shall mention the words “Composition taxable person, not eligible to collect tax on supplies”

Also, he shall mention the words “Composition Taxable person” on every notice or signboard displayed at place of business.

Must a Composition Dealer maintain detailed records?

Ans. No, a dealer registered under composition scheme is not required to maintain detailed records as in the case of a normal taxpayer.

Do Composition Dealers have the option to avail Input Tax Credit?

Ans. No, a Composition Dealer is not allowed to avail input tax credit of GST paid to their supplier.

Can a Composition Dealer issue Tax Invoice?

Ans. No. Since a Composition Dealer is not allowed to avail input tax credit, such a dealer cannot issue a tax invoice as well. A buyer from composition dealer will not be able to claim input tax on such goods.

Which returns are required to be filed by a taxable person registered under Composite Scheme?

Ans. The taxable person is required to furnish only one return i.e. GSTR-4 on a quarterly basis and an annual return in FORM GSTR-9A.

Is liability to pay taxes under Reverse Charge Mechanism covered under the Composite Scheme?

Ans. Any tax payable under Reverse Charge Mechanism will not be covered under the scheme. These taxes will be liable to be paid as a normal tax payer.

Can a Composition Dealer collect composition tax separately?

Ans. No, a Composition Dealer is not allowed to collect composition tax from the buyer.

Can a dealer involved in interstate supplies opt for Composition Scheme?

Ans. No, Composition Scheme is available only for intra-state supplies. If a dealer is involved in inter-State supplies, then he cannot opt for the scheme.

What are the penalties applicable on Composition Dealer in case of any default in tax payment?

Ans. If the tax administration has reason to believe that a composition dealer has wrongly availed the benefit under the composition scheme, then such a person shall be liable to pay all the taxes which he would have paid under the normal scheme. Also, he will be liable to pay a penalty equivalent to an amount of tax payable.This penalty will not be levied without giving a show cause notice to the dealer.

What are the transition provisions if a business transits from Composition Scheme under current regime to Regular Taxation under GST?

Ans. Taxpayers registered under composition scheme under the current regime will be allowed to take credit of input held in stock, or in semi-finished goods or in finished goods on the day immediately preceding the date from which they opt to be taxed as a regular tax payer.

What are the conditions for availing input credit on stock lying at the time of transition?

Ans. Following are the conditions which must be addressed by the taxpayer to avail credit on input at the time of transition from composition scheme to the normal scheme:

1. Such inputs or goods are intended to be used for making taxable supplies under GST law.
2. Taxpayer was eligible for CENVAT Credit on such goods under the previous regime, however, couldn’t claim it being under composition scheme.
3. Such goods are eligible for input tax credit under GST regime.
4. The taxpayer has legal evidence of input tax paid on such goods.
5. Such invoices were issued within a period of 12 months from GST applicable date.

What is the treatment for input credit availed when transitioning from normal scheme to Composition Scheme?

Ans. When switching from normal scheme to composition scheme, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day immediately preceding the date of such switchover. The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.