GST Composition Scheme – Question Answers with Chartered Accountant

GST Composition Scheme – Question Answers with Chartered Accountant: To make India a developed country from a developing country, people of the country must pay taxes. It can not be a fundamental right to not pay tax at the present time. If tax on your income is taxed then tax will be given. Finance Minister Arun Jaitley appealed the people of the country to change the mindset about tax for the first time after the Goods and Services Tax was introduced in the country. In this article we provide some very important question asked by trader to Chartered accountant related to GST Composition Scheme…

GST Composition Scheme

Changes recommended in Composition Scheme on 10th November 2017

The following changes were recommended in the Composition Scheme on the basis of discussions held in the 23rd meeting of the GST Council held at Guwahati today.

  1. Uniform rate of tax @ 1% under composition scheme for manufacturers andtraders (for traders, turnover will be counted only for supply of taxable goods). No change for composition scheme for restaurant.
  2. Supply of services by Composition taxpayer upto Rs 5 lakh per annum will be allowed by exempting the same
  3. Annual turnover eligibility for composition scheme will be increased to Rs 2 crore from the present limit of Rupees 1 crore under the law. Thereafter, eligibility for composition will be increased to Rs. 1.5 Crore per annum.
  4. The changes recommended by GST Council at (ii) and (iii) above will be implemented only after the necessary amendment of the CGST Act and SGST Acts.

GST Composition Scheme

Mr A Hello sir, Good day to you. How are you?
CA I am doing fine Mr. A, how about you?
Mr A Doing Good, So today can you tell me about the Composition scheme under GST?
CA Sure Mr. A, there is a provision of composition scheme under GST provide under Section 10. Any Person whose aggregate turnover (Taxable + Exempted) in preceding financial year did not 1 crore*, then that person can apply for registration under composition scheme.

Further, if in case a taxable person has different business segments (like Textile, Grocery etc) having same PAN as held by the taxable person, he must register all such businesses under the scheme. Hence, all the business under one PAN should opt for Composition scheme.

Mr A Ok, and if cross the limit of 75 Lacs in current year then can I continue with composition scheme for rest of the year?
CA No, Mr. A. The option of composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs. 1 crore*. In such cases, the person has to file form GST CMP-04 within seven days intimating withdrawal from composition scheme
Mr A Ok is there is any exception for any class of business entity who cannot enroll in composition scheme?
CA Actually, apart from the criteria of 1 crore*, there is a list of persons who cannot opt for composition scheme even if there turnover is below 1 crore*. They are:

  • i) Any service provider except restaurant service
  • ii) Person dealing in goods which are not covered under this act like Liquor
  • iii) Person having interstate supply
  • iv) Person supplying through e-Commerce operator
  • v) Person manufacturing goods as notified by government
Mr A Ok, so if I have to opt the composition for only one of my business, then I cannot opt it?
CA Yes, Mr. A. Your all business under one PAN should go for composition. It is not possible to register one entity in composition and another as normal using one PAN.
Mr A Ok, so what are the rates in Composition scheme?
CA In GST, there is no single rate for Composition dealers. The rates in GST for composition dealers is dependent on nature of dealer. The rates are as follows:

Manufacturers 1%
Specific service provider i.e. restaurant service 2.5%
Any other dealer 0.5%

Also, please note that any person registered under composition scheme will not be eligible to claim any input tax credit.

Mr A Ok, so are these the final rates?
CA These rates for CGST act and similarly there will be SGST/UTGST rates. Hence, the final composition rates will be total of CGST and SGST rates. For example, if in Rajasthan GST also the composition rate is 1% for manufacturers then the total composition rate for manufacturer will be 2% (CGST+SGST).

Also, instead of monthly returns, there are quarterly returns in composition scheme which makes this scheme easier form the point of view of compliance. We will discuss on the returns requirement under GST in our next discussion.

Mr A What are the invoice formats for Composition dealers in GST?
CA Under GST, every Composition dealer shall issue a bill of supply for sales. In that bill of supply, he shall mention the words “Composition taxable person, not eligible to collect tax on supplies”

Also, he shall mention the words “Composition Taxable person” on every notice or signboard displayed at place of business.

Mr A Ok, Awesome. Thanks for clearing the concept of Composition scheme under GST

*Latest update as per 22nd GST Council Meeting held on 6th Oct 2017

Threshold for composition scheme has been increased to 1 crore (from earlier 75 lakhs)

Author Details

MJL & Co, Jaipur (Chartered Accountants)

Email – MJLco.jaipur@gmail.com (ph – 0141-4915113)

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