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Composition Scheme under GST

Composition Scheme under GST:

The Composition levy scheme is a very simple, hassle free compliance scheme for small taxpayers. It is a voluntary and optional scheme.

Salient Features:

No elaborate records required 

Only quarterly returns required to be filed

Payment of tax required to be made quarterly

Enabling Section:

Provisions related to composition levy have been provided under section 10 of the Central GST Act, 2017 and Chapter 2 of the CGST Rules, 2017

Eligibility:

Turnover should be less than 1.5 Cr in other than special category states

For special catagory states it is 1 Cr (i.e. (i)Arunachal Pradesh, (ii) Assam, (iii) Manipur, (iv) Meghalaya, (v) Mizoram, (vi) Nagaland, (vii) Sikkim, (viii) Tripura and (ix) Himachal Pradesh)

Method to calculate Aggregate Turnover

Aggregate turnover is computed on all India basis for a person having same Permanent Account Number (PAN). It is sum of value of all outward supplies falling in the following four categories:

• Taxable supplies
• Exempt supplies
• Exports of goods or services or both • Inter-state supplies, but excludes 

The value of inward supplies on which tax is payable by a person on reverse charge basis &

• Taxes including cess paid under GST law

CBEC vide Order No. 01/2017-Central Tax dated 13th October, 2017 has clarified that a person suppling any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be ineligible for the composition scheme. In computing his aggregate turnover in order to determine his eligibility for composition scheme, value of supply of the exempt services including services by way of extending deposits, loans or advances shall not be taken into account.

Persons Ineligible:

A casual taxable person i.e. a person who occasionally undertakes supplies in a State or Union Territory where he has no fixed place of business.
ii. A non-resident Taxable person i.e. a person who occasionally undertakes supplies but has no fixed place of business or residence in India.
iii. A supplier of services except a person engaged in supply of restaurant service.
iv. A person engaged in providing inter-state supply of goods.
v. A person engaged in supply of non-taxable goods i.e. goods which

are not taxable under GST law

vi. A person engaged in supply of goods through an Electronic Commerce Operator (ECO) who is required to collect Tax at source under section 52 of the CGST Act.

vii. The goods held in stock by him on the appointed day have not been purchased

in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State where registration under the Composition Scheme has been taken.

viii. The goods held in stock by him have not been purchased from an unregistered

supplier and where purchased, he pays the tax under the reverse charge mechanism.

ix. A person engaged in manufacturing of goods notified under sec 10 (2) (e) of the CGST Act either in the year 2016-17 or later. Following goods have been notified for which composition scheme is not available.

S.No.
Classification(Tariff item/Chapter)
Description
1
2105 00 00
Ice cream and other edible ice, whether or not containing cocoa
2
2106 90 20
Pan masala
3
24
Tobacco and manufactured tobacco substitutes

Registration and intimation under said scheme:

A person who opts to apply under this scheme must be first a registered tax payer under GST and then has to apply prior to the start of the financial year in form GST CMP 02 and also has to a furnish a statement in FORM GST ITC-03 in accordance with the sub rule (4) of Rule 44 of CGST Rules, 2017, within 90 days from the commencement of the relevant financial year.

Option to be excercised PAN India basis:

A person registered in different states can apply for composition if he applies PAN India that is he cannot opt for composition in one state and regular assessment in other states

Bill of Supply
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.

Conditions & Restrictions under the scheme
A person opting for the scheme has to adhere to the following conditions
• Issue bill of supply in the prescribed manner
• Pay all taxes on purchases including taxes to be paid on reverse charge basis
• Do not claim input tax credit of purchases
• Mention the words “composition taxable person” on every notice board or signboard displayed at the prominent place at his every place of business.

Validity of the composition levy scheme
A person opting for the composition levy scheme can continue to pay tax under the said scheme as long as he satisfies the eligibility criteria and conditions related to the scheme and do not require to file a fresh application every year. But, such a person shall be liable to pay tax under sub-section (1) of section 9 of the CGST Act, 2017 from the day he ceases to satisfy any of the conditions and shall issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme.
Precautions:
A person may be rendered ineligible for composition if:
a) He wrongly opts for the scheme
b)His turnover crosses the threshold
c) He contravenes any of the eligibility criteria
Withdrawl from composition scheme:
There may be Three scenario
He crosses the threshold
He contravenes the eligibility criteria
Voluntarily
If any of the above happens then one has to file CMP 04 before if voluntarily and within 7 days of occurance if other two scenarios are there .Further in all cases he has to forward a statement in FORM GST ITC-01 containing details of the stock of the inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on which the option is withdrawn. The said statement has to be submitted on the common portal within 30 days from the date of withdrawal. He shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax as normal taxpayer under section 9 of the CGST Act, 2017.
Rates of taxes

Particulars Rate
Restaurant services:
[Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II)]
5%
Manufacturers
[Manufacturers ,Other than manufacturers of notified goods]
1%
Traders
[ Any other supplier eligible for composition levy under section 10 and Rules]
1%

Returns Required:

Quarterly return by the 18th of month following the quarter -GSTR 04

Annual Return by 31st December following the year

Note: The rates and other provisions are given as on the date of post publication.In case of any update please refer to relevant notifications regularly updated on our website or alternatively please drop a query at info@a2zefilingservices.com or you may register your query here

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