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COMPOSITION SCHEME UNDER GST

Friday, September 8

Objective: to bring simplicity and to reduce the compliance cost for small taxpayers. Eligibility: Available to small taxpayers whose aggregate turnover in the preceding financial year did not cross Rs. 75 lakhs (Rs. 50 Lakhs in case of Special category states). In case of a person having registrations in multiple states, the option to pay tax under composition scheme will have to exercised for all states. The option to pay tax under composition levy is required to be given prior to the commencement of the relevant financial year. Non Eligibility: Following persons are not eligible for composition scheme: a.Casual taxable person b.Non resident taxable person c.Supplier of services, other than restaurant service d.Person supplying non-taxable goods under GST e.Persons making inter-state outward supplies of goods f.Suppliers making any supply of goods through an E-Commerce operator who is required to collect TCS under GST g.Manufacturer of ice cream and other edible ice (whether or not containing cocoa), pan masala, tobacco and manufactures tobacco substitutes. Key points: 1.There is no restriction on procuring goods from inter-state suppliers by persons opting for the composition scheme. 2.A taxable person opting to pay tax under this scheme is out of the credit chain. He cannot take credit on his input supplies. 3.The composition dealer cannot collect tax paid by him on outward supplies from his customers. The registered person making purchases from a taxable person paying tax under the composition scheme cannot avail credit. 4.Composition dealer shall issue a bill of supply for the outward supplies made by him. He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him. 5.Since composition dealer is not eligible to make inter-state outward supply, it cannot make supplies to a SEZ unit. 6.Return Filing: quarterly returns in Form GSTR-4 by 18th of the month succeeding the quarter. 7.Rate of tax: a.Manufacturer: 1% of the turnover b.Restaurant services: 2.5% of the turnover c.Traders or any other supplier eligible for composition levy: 0.5% of the turnover 8.The option to pay tax under composition scheme lapses from the day on which the aggregate turnover during the F.Y. exceeds the specified limit (Rs. 75 lakhs/Rs.50 lakhs). When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.

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