Composition Scheme ( Lump-Sump )
- This Scheme is an Optional
- Pay Tax at the rate prescribed at minimal Rate
- Manufacturer – 1% (0.5 % SGST + 0.5 % CGST (w.e.f.01.01.2018)**
- Trader – 1% (0.5 % SGST + 0.5 % CGST)*
- Restaurants/ supplies referred to in clause (b) of paragraph 6 of Schedule II – 5% (2.5 % SGST + 2.5 % CGST )
* In case of trader Tax calculated only on “Taxable supply”
** In case of manufacturing 1% of “Turnover in state”
Conditions: u/s 10 (1)
- Annual Turnover upto Rs. *150 Lakhs ( Prior it was 100 Lakhs, before that 75 lakhs before that it was 50 Lakhs)
*If any Taxable person ( Other than whose ONLY in Service sector) whose supplies Services upto Rs. 5,00,000 with the value of supplies which are include in total limit.
- Not for services but only restaurant sector can Opt the Scheme
- No Tax Collection from buyer
- Neither a casual taxable person nor a non-resident taxable person
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 or
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.
Shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
- Manufacturer of Ice Cream
- Pan Masala
>Any tax payable under RCM will not be covered under the scheme. These taxes will be liable to be paid as a normal scheme.
Benefits: A scheme which is made for the benefit of small dealer, small manufacturer and small service provider by reducing their burden of compliance.,.
> less maintenance of books and records as compared to general dealer
> Less number of returns
> Not pay high Tax
> Issue bill of supply for supplies made by him.
Implication Dealer ceases to Composition Scheme
- Where any person ceases to pay tax u/s 10 –
=> Charge GST at Normal Rate from very next day
=> Shall entitled to take ITC of input held in stock or WIP and Capital goods on the immediately preceding
=> Provided that credit on capital goods shall be reduced by % as may prescribed
(Stock statement may be furnished separately for availing input tax credit on the stock available on the date preceding the date from which composition option is withdrawn in FORM GST ITC -01.)
> Tax = Total Turnover * Tax Rate
”Aggregate turnover in a State’ means “Value of all supplies ( Whether Taxable supplies + Exempt supplies) – GST Value of inward supplies taxable under reverse charge of all persons having the same PAN” but for the payment of Tax i.e. 1% , 5% as case may be on “Turnover in State” of the Assessee. “Turnover in State “ means the aggregate value of all taxable ( BEFORE THAT including exempt and non taxable )supplies and export of goods and/or service made within state by taxable person”
*”Now only Taxable supplies are included”
> Composition scheme not applicable for tax payable under RCM:
It is important to note that for any tax payable under reverse charge mechanism, the option of payment under this scheme will not be available. In other words, a taxable person opting for composition scheme will be required to pay tax on supplies taxable under RCM at regular rates and not the composition rate
Forms under Composition Scheme : FORM GST
- GST CMP-1 Any person who has been granted registration on provisional basis and opt to pay tax under Composition Scheme have to file electronically within 30 days from 1st July, 2017.(Only for persons registered under the existing law migrating on the appointed day)
- GST CMP-2 A normal registered person who opt to composition scheme have to first file Form CMP-02 prior to commencement of financial year within 60 days(For persons registered under the Act)
GST CMP-3 Declaration for intimation of ITC reversal on inputs held in stock, inputs contained in semi-finished and finished goods held in stock and capital goods (Intimation of details of stock on date of opting for composition levy)
migrating on the 1st July, 2017, Intimation of details of stock on date of opting for composition scheme
- GST CMP -4 Intimation for withdrawal for Composition Scheme
- GST CMP -5 to show cause within fifteen days of the receipt of such notice as to why option to pay tax under section 10 should not be denied.
- GST CMP -6 reply to the show cause notice issued
- GST CMP -7 proper officer shall issue an order in FORM GST CMP-07 within thirty days of receipt of such reply, either accepting the reply, or denying the option to pay tax under section 10 from the date of option or from the date of the event concerning such contravention
Return under the scheme:
- To furnish ONLY one return i.e.
>Only a Quarterly return will be uploaded under GSTR-4 by
>Annual Returns: FORM GSTR-9A
DETAILS IN GSTR -4
-Invoice wise inter and intra state inward supply received from RD and URD
-Import of goods and services
-Consolidated details of outward supplies made
-Debit and credit note issued and received
- NOT issue a Tax invoice so a buyer of such dealer can’t get credit
- Issue a E way Bill whenever require
- NO Input tax credit of GST paid to their supplier
- Not supply to Outside of state (Inter State) and also not to SEZ
- If any person withdrawal in any one place then, shall deemed to be in all other places
Must a Composition Dealer maintain detailed records?
No, a dealer registered under composition scheme is not required to maintain detailed records as in the case of a normal taxpayer.
Can I opt for Composition Scheme in one year and regular in another?
Yes, this is possible. You can opt to switch between the Composition Scheme and the normal scheme based on your turnover. However, you will have to keep in mind that this will affect the way you issue invoices and file your returns.
The declaration of change can be done using Form GST-CMP 02. For the current financial year, the window for change has been extended until March 31st, 2018. Let’s assume a taxpayer who was registered under the normal scheme from July onwards decides to opt for the Composition Scheme from November. For the period of July-October 2017, the taxpayer will have to file returns as per the rules for normal taxpayers. In this example composition Scheme will apply from November 1st; and the taxpayer will have to follow all the rules of the Composition Scheme like issuing a Bill of Supply instead of a normal invoice, putting up a sign outside their premises saying that they are part of the Composition Scheme and are not eligible for charging GST on sales etc.
Can I break up my businesses and opt for Composition Scheme for all of them separately?
Under GST, each business is given a specific identification number called the GSTIN. The GSTIN is associated with the PAN of the business or the business owner. As long as all your businesses are associated with a single PAN, you can choose only one of the schemes for all your businesses – regular or composition scheme. However, if you have businesses with different PANs, then you can opt for different schemes for all of them depending on the turnover of each business.
Is it true that Composition Dealers can offer the same product at a lower price?
Yes, since composition dealers cannot charge GST on their sales, so the end consumer pays less money than usual. Composition dealers can also buy from unregistered dealers in order to keep their costs low.
You can find me on YouTube at one is for Composition Scheme and other is for tax calculation under Scheme from below given link
YouTube Link : https://youtu.be/mv5_a74IBHU
YouTube Link : https://youtu.be/8FaGRg7BKn0