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All about Composition Scheme

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All about Composition Scheme

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  1. All about Composition Scheme| Composition Dealer| GST| Section 10 of CGST Act

  2. 1. Eligible to opt for Composition Scheme • For manufacturers and traders: Manufacturers and traders, with aggregate turnover till Rs.1.5 crore in the preceding financial year or in current financial year can opt for composition scheme • For restaurants not serving alcohol:  For restaurants, not serving alcohol, for the purpose of opting composition scheme, aggregate turnover must not exceed INR 1.50 crores during preceding financial and doesn’t expected to increase INR 1.50 crores during current financial year.

  3. Aggregate Turnover:  • For the purpose of computation of threshold limit calculation, aggregate turnover, i.e., turnover for all units registered under the same PAN, shall be considered. 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,  • However, it doesn’t include the value of inward supplies on which tax is payable by a person on a reverse charge basis &  Taxes including cess paid under GST law

  4. 2. Benefits of composition schemes • Reduced tax payments as GST under composition scheme is paid at very least rate as compared to GST rates applicable for regular dealers. • Lower compliance requirements: Every regular dealer is required to file GSTR-3B on monthly basis and GSTR-1 on monthly/quarterly basis. However, every composition dealer is required to GSTR-4 on quarterly basis. • Increased liquidity as payment of GST is to be made at reduced rate, therefore, it increases liquidity of taxpayer • Less paperwork as the GST composition scheme eliminates a lot of red tape and paperwork which works well for a small business

  5. 3. Drawbacks of composition schemes • No Input Tax Credit: Benefit of composition scheme is granted subject to the condition that dealer opting for Composition scheme is not eligible to avail ITC. Rationale for not granting ITC is imposing GST at a lower rate. • No Collection of Tax: Composition Dealers are not allowed to collect tax amount from its customers. • No Interstate transfer: Dealers engaged in inter-state supply are not allowed to opt for composition schemes. Therefore, if post opting for this scheme, a dealer makes inter-state supply then he shall be considered as opted out of such scheme from such date

  6. 4. Dealer Non-eligible to opt for the Composition Scheme • Producer of pan masala, or tobacco, ice cream • Non-resident taxable person  • Casual taxable person: Casual taxable persons are those who occasionally involves in supply of goods or services in state and such person has no fixed place of business in such state. • The person supplying goods through an e-commerce operator • Taxpayer supplying exempt supplies • Any person engaged in manufacturing of Ice Cream, Pan Masala and Tobacco products.

  7. 5. Conditions for availing Composition Scheme • No Input Tax Credit can be claimed by a dealer opting for composition scheme • Composition dealers cannot supply goods which are not taxable under GST such as alcohol. • If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) in different states under the same PAN, then dealer is required to opt composition scheme for all the segments in all the states simultaneously. • Composition dealer are liable to pay GST under RCM wherever applicable. • The words ‘composition taxable person’ must be written on every bill of supply issued by the taxpaye • No Input Tax Credit can be claimed by a dealer opting for composition scheme • Composition dealers cannot supply goods which are not taxable under GST such as alcohol. • If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) in different states under the same PAN, then dealer is required to opt composition scheme for all the segments in all the states simultaneously. • Composition dealer are liable to pay GST under RCM wherever applicable. • The words ‘composition taxable person’ must be written on every bill of supply issued by the taxpaye

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