All About GST-COMPOSITION SCHEME

Big organizations in India have the required resources and expertise that can facilitate the compliance procedure. But on the other hand, small and medium enterprises (SME) and startups will have difficulties in complying with the normal provisions of the GST.

Thus, to lower the burden of compliance for the small traders and start-ups, COMPOSITION SCHEME has been introduced under GST law where the assesses have to pay tax at a very minimum rate on the turnover

Registration under the composition scheme is voluntary and optional

ELIGIBILITY CRITERIA

The above condition needs to be fulfilled to opt for the composition scheme

Threshold limit:

Any manufacturer or trader whose turnover is less than Rs.1.5 crore in a financial year (applicable for a restaurant not serving alcohol)
The threshold limit is Rs.75 lakhs for northeastern states and Himachal Pradesh.
Any service provider whose turnover of less than Rs. 50 lakhs in a financial year.

Intrastate supplies

A taxpayer is eligible for the composition scheme only if he does intrastate supplies (within the state). However, he can procure goods from the interstate supply.

For example, Tamilnadu is the place of business of the company ‘A’.

If the company ‘A‘

1. Supplies Goods/Services from Tamilnadu to Andhra Pradesh (Interstate supply) then company ‘A’ cannot register under the composition scheme.

2. Supplies Goods/Services within Tamilnadu (Intrastate supply) then it is eligible for registration under the composition scheme.

3. Procure Goods/Services from Tamilnadu to Andhra Pradesh or within Tamilnadu then it is eligible for registration under the composition scheme.

Bill of supply

Registered taxpayers under the GST composition scheme will be required to raise the bill of supply instead of tax invoice in the regular scheme.

Input tax credit

Under the GST composition scheme, a registered taxpayer does not have the option for claiming input tax credit as the taxpayer pays the tax directly to the government based on the turnover.

GST on taxable goods

· Earlier GST was applicable even for the exempted goods but from 1st January 2019, it is only applicable for the taxable goods and services. Therefore, one cannot opt for a composition scheme if he is engaged in the supply of non-taxable goods or services.

Who cannot opt for the GST composition scheme?

Suppliers who are not under the threshold limit as mentioned above.
A supplier who is engaged in interstate supplies
A supplier who is engaged in the supply of non-taxable goods or services
A supplier who is engaged in the supply of goods through e-commerce operators

Tax rate

         Rate of tax		         Category of registered person 
1% (CGST is 0.5% & SGST is 0.5%)		Other suppliers
2% (CGST is 1% & SGST is 1%)			Manufacturer
5% (CGST is 2.5% & SGST is 2.5%		Restaurant not serving alcohol

Registration

Newly registering business under the GST composition scheme has to intimate in the form GST REG 01 for opting for the composition scheme.

For the business who has already registered under the regular scheme and wants to switch to the composition scheme then they have to intimate in the Form GST CMP-01.
For the business who has registered under the GST composition scheme and wants to switch to a regular scheme as maybe the circumstances then they have to file the form GST CMP-04 within 7 days.

Switch over from Normal to composition scheme

Registered business needs to intimate in form GST CMP-01 to switch to a composition scheme.
Further, they need to furnish a statement in form GST ITC-03 for details of ITC relating to inputs lying in stock, semi-finished goods, and finished goods.

Switch over from Composition to Normal scheme

If a registered person under the composition scheme has crossed the threshold limit, ceases to be a composition dealer, and needs to pay tax under normal scheme then form GST CMP-04 needs to be filed within 7 days.
The input tax credit can be availed in respect of inputs held in stock, semi-finished goods, finished goods, and capital goods on the day immediately preceding the date from which he becomes liable to pay tax under normal scheme.
To avail the input tax credit, he would require to furnish the statement in form GST ITC-01 within 30 days of becoming eligible to take ITC
A practicing chartered accountant or cost accountant needs certify form GST ITC 01 if the claim amount exceeds Rs.2 lakhs.

Filing of return

The taxpayers under the GST composition scheme have to submit or file returns only once in a year in GSTR-4 instead of filing monthly returns under the regular scheme.

GSTR-4

GSTR-4 is a return that had to be filed by a composition dealer once in a year. Only one return that is GSTR-4 needs to be filed by a composition dealer once in a year by the 30th of April.

For example, for the financial year 2019-2020, the due date to file GSTR-4 will be on or before 30th April 2020.

The due date for filing GSTR-4 for the financial year 2019-2020 is extended to 31st August 2020 via CBIC notification dated 13th July 2020.

Earlier, it has to be filed on a quarterly basis and the due date was 18th of the month after the end of the quarter.
GSTR-4 cannot be revised after filing on the GSTN portal.
A late fee of Rs.200 per day is levied if the GSTR-4 is not filed within the due date.
The maximum late fee that can be charged cannot exceed Rs.5,000.

DISCLAIMER : The information contained herein is generic in nature and is meant for basic educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product/Examination purpose. Subject to Amendments. Yogesh Suthar is not liable for any decision arising out of the use of this information.