WHAT IS COMPOSITION SCHEME UNDER GOODS AND SERVICES TAX? A Brief Analysis
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WHAT IS COMPOSITION SCHEME UNDER GOODS AND SERVICES TAX?
a registered person, whose aggregate turnover in the preceding financial year did not exceed*
may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding,
–– (a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and
(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers,
subject to such conditions and restrictions as may be prescribed:
*earlier the limit was Rs. 50 lakhs, increased to Rs. 1 crore and the threshold limit for opting into composition scheme has been now increased to Rs. 1.5 crores.
Tax rate applicable to a dealer opting for Composition Scheme
| CGST | SGST | Total | |
| Manufacturers and Traders | 0.5% | 0.5% | 1% |
| Restaurants not serving Alcohol | 2.5% | 2.5% | 5% |
Calculation of Tax under Composition Scheme
| Tax on supplies (net of advance and goods returned) | a |
| Add | b |
| Tax on Business to Business transactions where reverse charge is applicable | c |
| Tax on Business to Business transactions from unregistered suppliers | d |
| Tax on import of services | e |
| Total GST payable by a dealer under Goods and Services Tax | (a+b+c+d+e) |
Chapter II of the CGST Rules 2017 deals with the various propositions of levy of composition scheme under the CGST Act 2017. Rule 3-7 of Chapter II of the CGST Rules 2017(as amended upto 06th July 2018) have been reproduced below-
| Rule 3 | Intimation for Composition Levy |
| Rule 4 | Effective date for composition levy |
| Rule 5 | Conditions and restrictions for composition levy |
| Rule 6 | Validity of Composition Levy |
| Rule 7 | Rate of the Composition Levy |
The person who has opted for Composition levy under GST Act is called the Composition Dealer. A dealer who has opted for Composition scheme under GST Act has to take care of a certain provisions which are required to be complied with in case the assesse wants to enjoy the benefits of the scheme.
The most important documentation involved in the Composition levy is called the Bill of Supply to be issued by the Composition Dealer in lieu of the tax invoice which is issued by the tax payers other than the composition dealers.
The composition scheme provides for a very simple way of filing returns by the composition dealers. The taxpayer who has opted for composition scheme under GST Act has to file a single quarterly return as GSTR 4 for the income earned and tax paid during the preceding Financial Year. Unlike other tax payers who need to furnish a large no of returns under GST mechanism , the dealer under composition levy is required to submit only one quarterly return i.e. GSTR 4.
Due dates for filing GSTR 4
| Period | Due Date |
| April-June 2018 | 18th July 2018 |
| July-September 2018 | 18th Oct 2018 |
| October-December 2018 | 18th Jan 2019 |
| January-March 2019 | 18th April 2019 |
Purpose of introducing the Composition levy Scheme in the Indian Taxation Laws and the corresponding benefits to Small Tax Payers
The Government of India has introduced the composition scheme for the benefits of the Small Tax Payers in order to minimize the burden of compliance and additional tax burden. The basic reason to introduce such beneficial scheme to small tax payers is that the small tax payers has limited resources to meet all the expenses to comply with so many provisions and procedures laid down in the act.
Despite of some disadvantages, the composition scheme has been duly accepted by the masses. 938,165 entities have opted composition scheme in the latest data findings.
CA Rubneet Anand
B.Com, M.Com(Finance& Taxation), MBA(Finance & International Business- IMT Ghaziabad)
carubneetanand@gmail.com
Deputy Manager (Internal Audit & Indirect Taxation)-M/s SML Isuzu Ltd
Facebook Page- Corporate Prism-Consultation in Accounting & Corporate Management
https://www.facebook.com/CARubneetAnand/
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