Analysis of Composition Scheme Under GST

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Composition Levy

Composition Levy :-  A registered person, not having aggregate turnover exceeding Rs.150 lakh in the preceding financial year may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount calculated at such rate as may be prescribed.

·       Eligibility For The Composition Scheme:-

Following are the person who cannot opt for composition scheme under GST :-

1.     Casual taxable person & nonresident taxable person.

2.     Supplier whose turnover cross the prescribed limit as notified the government time to time.

3.     Taxpayer supplying exempted goods.

4.     Taxpayer making interstate supply.

5.     Taxpayer supplying Pan Masala, Tobacco & Ice Cream.

 

Where a person with a PAN has more than one registration, it shall be mandatory for all such persons with same PAN to opt for composition levy else the registered person shall become ineligible for opting for composition levy.

·       Drawback of the scheme :-

1.     Supplier not able to take input tax credit.

2.     Supplier cannot make the interstate supply.

3.     Supplier cannot sale the exempted goods.

4.     Have to pay the RCM as per normal rate.

 

 

 

 

·       Rate of GST

Type of Business

CGST

SGST

Total Rate

Manufacturers and trader of goods

0.50%

0.50%

1%

Restaurants not serving alcohol

2.5%

2.5%

5%

Other services provider

3%

3%

6%

 

·       GST returns to be filed by a composite dealer :-

A composite dealer has to file a quarterly return CMP-08 by 18th of the month following the quarter. In addition to this, the dealer has to file an annual return GSTR-4 by 30th April of the next year.

 

·       Other Relevant Points to be noted

1.     A person covered under Composition Levy may become liable under reverse charge on inward supplies as per Section 9(3).

 

2.     Even from 1st January, 2020, under sub-section 2A, the registered persons including service providers whose turnover is below fifty lakh rupees and who are otherwise not eligible for composition scheme, are allowed to pay tax at the rate of 3% and all provision of section 10 relating to composition levy are made applicable to them.

 

3.     The rate of composition mentioned above is under CGST Act, same rate will be under SGST Act also. Therefore the rates will be double i.e., 0.5% will be 1%, 1% will be 2%, 2.5% will be 5% and 3% will be 6%.

 

4.     A taxable person opting for the scheme has to issue bill of supply as he is not eligible to issue taxable invoice under GST. He has to mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of every bill of supply issued by him (Rule 5(f)).

 

5.     A taxable person opting for composition 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 (Rule 5(g)).

 

6.     From F. Y. 2019-20, a taxable person opting for composition is required to pay the tax quarterly under Form CMP 08 and is required to file the Annual Return in form GSTR 4.

 

7.     As per amendment done by CGST (Amendment) Act, 2018 w.e.f. 01.02.2019 following persons are eligible to opt for composition i.e. (1) A manufacturer or a trader supplying service to an extent of 10% of turnover or Rs. 5 Lacs whichever is higher (2) Persons engaged in supply of food for human consumption not serving alcohol.

 

8.     A manufacturer of ice cream, pan masala or tobacco is not permitted to opt for composition scheme.

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