Know about Composite Scheme under GST

[Rajeev Jain]

"Composite Scheme" is a plan under the GST law for the small taxpayer or business entity. It was created to make easy compliance and GST payment. Any taxpayer with a turnover of less than Rs.1.50 Crore may opt for this scheme. Small taxpayer can save time by paying GST at a fixed rate on the turnover.

Eligibility & Non-Eligibility:

At present, a taxpayer or businesses may apply for composition scheme if their turnover does not exceed Rs.1.50 Crores. While determining turnover for this eligibility, business entity must take in to account the total turnover of all the business on same PAN. The said composite scheme is available to the following types of business entity:

a. Producers

b. Retailers

c. Restaurants without Alcohol

The following business are not eligible to opt for the Composition scheme:

a. Manufacturer of Ice Cream, Tabacco, and Pan Masala

b. Individual making inter-state supplies

c. Casual Taxpayer

d. Non-Resident Tax Payer

e. Business that use an e-commerce operator to supply goods.      

Benefits under this Scheme:

The composite scheme offers two key advantages V/s normal GST filing:

a. less paperwork and compliance, and

b. lower tax liabilities.

GST Rates:

The following rates are applicable for dealer registered as composite tax payer:

a. On manufacturer and traders – 1%

b. On Restaurant without Alcohol – 5%

c. Other Service Provider – 6%

Returns:

If a taxpayer opts for Composite scheme, then he is required to file only one quarterly return i.e., GSTR-4A and one annual return i.e., GSTR-9A.

Due date for filing these returns/forms is as under:

GSTR-4A: 18th of the month succeeding the quarter or as extended by the Government from time to time.

GSTR-9A: On or before 30^th June for the previous financial year.

Apart from the above said returns, the following forms or compliances are also required to file:

a. Form GST CMP-02: To opt for the composition scheme the taxpayer has to file this form at the beginning of the financial year which is in the month of April.

b. Form GST CMP- 08: The taxpayer who has opted for the composition scheme has to file this GST return form to file the quarterly return on the 18th of the very month on a quarterly basis.

c. GST CMP-04: When a taxpayer wants to withdraw from the composition scheme, he/she files GST CMP-04.  

Other Provisions or important points:

The following are other very important provisions applicable on the dealer registered under the Composition scheme:

a. Unlike the normal taxpayers, composition dealers do not have to maintain detailed records of all their financial transactions.

b. The dealer must issue bills of supply and not tax invoices, as the dealer pays the tax out of his pocket. Such dealers cannot recover the GST amount paid by their customers.

c. The dealers must pay tax under the reverse-charge mechanism wherever it is applicable. The rate for the supplies produced will be the rate at which the dealer has to pay the GST. Hence, the rate under the scheme cannot be used to pay taxes under the reverse-charge mechanism.

d. Composition dealers can not avail of any input tax credit (ITC) for the tax they paid under the reverse charge mechanism.

e. Such dealers do not have to pay the IGST since they have to only pay the CGST and SGST for the import of services or goods from an unregistered dealer under the reverse charge mechanism.

f. Composition dealers have to pay tax at a specific rate on their total sales. They must also pay tax under the reverse-charge mechanism for certain purchases.

g. The total GST payable is consolidated of “tax on supplies” + “Tax on B2B transactions (Reverse Charge)” + “Tax on unregistered dealer B2B purchases” + “Tax on import of services”.

Hope the above article is useful for small tax payer. The author can be reached at rajiv@rajivudai.com.