What is Composition Scheme ? Benefits of composition scheme.

 

COMPOSITION SCHEME UNDER GST

The composition scheme is an alternative method of levy of GST under the Goods and Services Tax (GST) system in India. The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayer and make it easier for them to comply with the GST law.

Applicable GST rates under the composition scheme, eligible taxpayers need to pay a fixed percentage of their turnover as GST instead of the regular applicable GST rates. Currently, the GST rate under the composition scheme is either 1% or 5% of the turnover, depending on the type of business that is 1% in case of trader or manufacturer as 0.5 % CGST and 0.5% SGST and 5 % in case of restaurant services as 2.5% SGST and 2.5% CGST of turnover.

To avail the benefits of composition scheme the eligibility criteria for the composition scheme, a taxpayer must have an annual turnover of up to Rs. 1.5 crore and must not be engaged in any inter-state supplies, the supply of goods through e-commerce platforms, or the supply of non-taxable goods. However the limit of turnover in specified state an annual turnover of up to 75 lacs that is Arunachal Pradesh, Manipur, Sikkim, Meghalaya, Mizoram, Nagaland, Tripura, and Uttarakhand. The provision shall be effective from 1st April 2019.

Composition Scheme for Services, the gst council in the 32nd meeting dated 10th January, 2019 decided that the composition scheme shall be made available to the suppliers of services (or mixed suppliers) with a special rate at 6% (3% CGST and 3% SGST) and to avail the benefits of composition scheme the turnover of immediate preceding financial year must be up to 50 Lacs. The said decision shall be made effective from 1st April, 2019.

The Taxpayers who have availed the composition scheme are not allowed to collect GST from their customers or claim input tax credit. Additionally, they are required to file quarterly returns instead of monthly returns and maintain fewer records as compared to regular taxpayers.

Finally, the composition scheme is a good option available to small taxpayers to simplify their compliance with the GST law and reduce their tax liability. But there is a need to analyze that to opt composition scheme is actually a better option or it is not lucrative as it is appearing.

It is advisable do not take decision own your own, visit the office of professionals and consult with them because professionals shall advise you the best according to your business need.

CA KHALID REHMAN

(M.Com,Chartered Accountant)

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