What is Composition Scheme under GST?
Composition scheme under the law is for small businesses. This is to bring relief to small businesses so that they need not be burdened with the compliance provisions under the law. Thus, an option has been provided where they can opt to pay a fixed percentage of turnover as fees in lieu of tax and be relieved from the detailed compliance of the provisions of law. Composition levy would be generally opted by persons who are supplying goods & services or both to the end consumer.
Since the enrollment of GST so many changes have been made by GST Council to ease out the burden of Taxpayers and improve compliance. in the 23rd GST Council Meeting held on 10th November 2017, and in this GST Council meeting a bigger step was taken for taxpayers under composition scheme seeing to the difficulties faced by small taxpayers in filing returns and coping with GST Compliance. Let’s take a tour of Changes made in GST composition scheme starting from the day of GST enrollment.
Gist of Changes in GST council meeting for Composition Tax dealers :
| GST council meeting changes | Position before the 23rd GST Council Meeting | Position after the 23rd GST Council Meeting |
| Threshold Limit for Gst Registration under Composition Scheme under GST | At the time of enrollment of GST – Position :
Aggregate turnover in preceding financial year to not exceed Rs. 75 lacs p. a.,
Which was then hiked to 1. 5 crore lacs p.a., owing to difficulties faced by small taxpayers while filing the complicated returns
|
2 Crores per annum., |
| Uniform GST composition tax rate | Composition scheme rate under GST was
1% of the turnover in State or turnover in Union Territory in case of a manufacturer 2.5% of the turnover in State or turnover in Union Territory in case of persons engaged in making supplies. This entry covers the registered persons making supply of food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption. For e.g. Restaurants or Hotels. 0.5% of the turnover in State or turnover in Union Territory in case of other suppliers.
|
Composition scheme rate under GST has now been harmonised for all taxpayers at 1%.
However, no change has been announced on the GST composition tax rate for restaurants. It continues to hold at 2.5% of turnover in State or union territory
(Note : However, the given rates are only in respect of CGST Act, Equivalent Rates would be prescribed under SGST/UTGST Act. Thus effective rates would be 2% for all taxpayers, 5% for persons making supply of food.) |
| Suppliers of exempt supplies allowed for composition scheme under GST | Not allowed. Earlier, a supplier of exempt supplies was considered ineligible to avail the composition scheme under GST. | But now, a taxable person who is engaged in supply of exempt supplies, and meets all other eligibility conditions, will be allowed to opt for the composition scheme. |
| Service Providers now allowed to avail the composition scheme under GST | Previously ineligible to avail composition scheme under GST | Now, not just restaurants, but all types of service providers can avail composition scheme.
They can supply services up to INR 5 Lakhs per annum, which will be exempted from tax. |
| Option to avail the composition scheme under GST open till this Financial Year
|
Both migrated and new taxpayers, will have the option to avail composition scheme till the 31st of March, 2018. | |
| Composition Returns | Due date for the first quarter after the GST roll out i.e., for July to September ,2017 was initially – 18th October.
Was again postponed to 15th Nov 2017 |
GSTR-4 due date for the period July to September extended to 24th December 2017. |
In short, the composition scheme has more than what meets the eye. SMEs across the nation, will need to think thoroughly before opting for the composition scheme, and take an informed decision.
Follow our WhatsApp channel
