TMI BlogGuidelines on composition and levy on directives/instructions regarding migration.X X X X Extracts X X X X X X X X Extracts X X X X ..... ST/HGST Act, 2017- Furnishing of Return by Taxable Person under Composition levy. GST Composition Rules (Rule 3 to 7). Relevant Definitions: Term (Reference section) Aggregate Turnover: (Section 2(6) of CGST/HGST Act, 2017) Turnover in state (Section 2 (112) of CGST/HGST Act, 2017) Reverse Charge (section 2 (98) of the CCST/HGST Act, 2017) Exempt supply (Section 2 (47) of the CGST/HGST Act, 2017) Non-taxable supply (Section 2 (78) Of the CGST/HGST Act, 2017) Rates of Tax under Composition Scheme: As per section 10(1) of the CGST/HGST Act, 2017, read with Rule 7 of GST Composition Rules rates under composition scheme are as under: (i) 2% (1% CGST+1% SGST) of the turnover in the State in case of manufacturers. (ii) 5% (2.5% CGST+2.5% SGST) of the turnover in the State in case of food/restaurant services. (iii) 1% (0.5% CGST+0.5% SGST) of the turnover in the State in case of other suppliers (like traders/agents). Other tax liability to be discharged: Any supply of goods/services on which tax is to be paid on reverse charge basis by the recipient (Ref: Section 9(3) of the CGST/HGST Act, 2017. (Notification no. 38/ST-2, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Rules) He shall mention the words composition taxable person on ever/ notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business. (Ref: Rule 5(1)(g) of composition Rules) He is not entitled to any Input Tax Credit (Ref: Section 10(4) of the CGST/HGST Act, 2017) He cannot collect any tax from the recipient on supplies made by him (Ref: Section 10(4) of the CGST/HGST Act, 2017) Non-eligibility for Composition Scheme (Ref: Section 10 of CGST/HGST Act, 2017): The following taxable persons are not eligible for composition levy,- engaged in supplies of services other than supply of goods, being food or any other article of human consumption or any drink (other than alcoholic liquor) {Ref: clause (b) of Paragraph 6 of Schedule II of CGST/HGST Act, 2017} i.e. supplies other than restaurants, caterers not eligible (Ref: Section 10(2)(a) of the CGST/HGST Act, 2017); making supply of goods not leviable to CST (Ref: Section 10(2)(b) of the CGST/HGST Act, 2017); making inter-state supplies of goods (Ref: Section 10(2)(c) of the CGST/HGST Act, 2017); making su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 from the date of the option or from the date of the event concerning such contravention, as the case may be. (6) Every person who has furnished an intimation under sub-rule (2) or filed an application for withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under sub-rule (5), may electronically furnish at the common portal, either directly or through a Facilitation Centre notified by the Commissioner, a statement in FORM GST ITC- 01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on which the option is withdrawn or denied, within a period of thirty days from the 4 date from which the option is withdrawn or from the date of the order passed in FORM GST CMP-07 , as the case may be. (7) Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to pay tax under section 10 in accordance with sub-rule (5) in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Perman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upees, whichever is higher in case of other than fraud cases. (Ref: Section 73(11) of the CGST/HGST Act, 2017) Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice, result in imposition of interest along with penalty of 50% of tax amount in case of fraud cases. (Ref: Section 74(11) of the CGST/HGST Act, 2017) Time of Exercising of option for Availing Composition Scheme (Ref: Rule 3 of GST composition rules) Option to avail scheme prior to appointed day or within 30 days from the appointed day or At the time of first registration. or Prior to the beginning of financial year Comparison of Composition GST levy vs. Normal CST levy at a Glance Subject area Composition scheme Normal scheme Eligibility for Input tax credit Not eligible Eligible Filing of return Quarterly Monthly Collection of taxes from buyers Not allowed to collect tax from buyers. Allowed to collect tax paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r composition at the beginning of financial year. (A). Taxable Person registered (under existing law) exercising Option with effect from Appointed Date: (Ref: Rule 3(1) of GST composition Rules). As per rule 3(1) of the Composition Rules, the person who has been granted registration on provisional basis and who opts to pay tax under section 10 shall electronically file intimation in form GST CMP-01 on common portal prior to the appointed day or within 30 days. (B) Newly Registered Person (not registered under Existing law) exercising option at the time of obtaining registration (Ref: Rule 3(2) of GST composition Rules). Any person who is not registered under the existing law, but intends to register either from appointed date or subsequent to that will have to make application in form GST-REG-1. He shall indicate the option of availing benefit of section 10. Such exercising of option in form GST REG-1 shall be considered as intimation to pay tax under the said section as provided in rule 3(2) of GST Composition Rules. (C). Registered Person opting composition scheme u/s 10 after obtaining registration (Ref: Rule 3(3) of GST Composition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Manipur d) Meghalaya e) Mizoram f) Nagaland g) Sikkim h) Tripura i) Himachal Pradesh [Section 10(1) of CGST/HGST 2017] Q 4. Who are the persons not eligible for composition scheme? Ans. Following persons are not allowed to opt for the composition scheme:- a) a casual taxable person or non-resident person; b) suppliers whose aggregate turnover in the preceding financial year crossed ₹ 75 Lakh; c) supplier who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis; d) supplier of services, other than restaurant service; e) persons supplying goods which are not taxable under GST law; f) suppliers making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52 and; g) a manufacturer of following goods: Sr. No. Classification (Tariff item/Chapter) Description of Goods 1. 2105 00 00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme is out of the credit chain. He can not take credit on his input supplies. When he switches aver from composition scheme to normal scheme, eligible credit on the date of transition would be allowed (refer Q 6 above) Q9. Can a registered person, who purchases goods from a taxable person paying tax under the composition scheme, avail credit of tax paid on purchases made from the composition dealer? Ans. No. As the composition dealer can not collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme can not avail credit. Q10. Can a person paying tax under the composition scheme issue a tax invoice under GST? Ans. No. He can issue a bill of supply in lieu of tax invoice. Q11. Are monthly returns required to be filed by the person opting to pay tax under the composition scheme? Ans. Such persons need to electronically file quarterly returns in Form GSTR-4 on the GSTN common portal by the 18th of the month succeeding the quarter. For example, return in respect of supplies made during July, 2017 to September, 2017 is required to be filed by 18th October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can give the option to pav tax under the composition scheme in Part B of FORM GST REG-01. This will be considered an intimation to pay tax under the composition scheme Q18. Can the option to pav tax under composition levy be exercised at any time of the year? Ans. No. The option is required to be given electronically in FORM GST CMP-02 , prior to the commencement of the relevant financial year. Q19. Can a person who has already obtained registration, opt for payment under composition levy? If so, how? Ans. Yes. Such persons need to give intimation in Form GST CMP-02 but it will be effective from beginning of the financial year only. Q20. What are the compliances from ITC point of view that need to be made by a person opting for composition levy? Ans. The registered person opting to pay tax under composition scheme is required to pay an amount equal to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of exercise of option. The ITC on inputs shall be calculated proportionately on the basis of corresponding invoices on which credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Persons opting for composition after obtaining registration (Intimation under Rule 3(3)). The beginning of the financial year. Q23. What are the other conditions and restrictions subject to which a person is allowed to avail of composition scheme? Ans. The person exercising the option to pay tax under section 10 shall comply with the following other conditions (in addition to what is stated in answer to Q 4 above), namely:- a) he 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; b) he 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. Q24. What is the validity of composition levy? Ans. The option to pay tax under composition levy would remain valid so long as conditions mentioned in section 10 of the CGST/HGST Act, 2017 and Rule 3 to 5 of the CGST/HGST Rules, 2017 remain satisfied. Q25. Can a person paying tax under composition levy, withdraw voluntarily from the scheme? If so, how? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xception being supplier of restaurant services. Q30. What are the penal provision if a person opts for the composition scheme in violation of the conditions? Ans. If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for determination of tax and penalty. Q31. Can a person paying tax under composition scheme make supplies of goods to SEZ? Ans. No. Supplies to SEZ from domestic tariff area will be treated as inter-State supply. A person paying tax under composition scheme can not make inter-State outward supply of goods. Thus, for making supplies to an SEZ unit, d person needs to take registration as a regular taxpayer. The supplies to SEZ will be zero rated and the supplier will be entitled to make supplies without payment of tax or if he pays tax, he will be entitled to refund of tax so paid. Q32. A registered person has excess ITC Of ₹ 10,000/- in his last VAT return for the period immediately preceding the appointed day. Under GST, he opts for composition scheme. Can he carry forward the aforesaid exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 18 th day after the end of each quarter. He has to file annual return in the FORM GSTR-9A . [section 39(2), of the CGST/HGST Act, 2017 and CGST/HGST Rules 2017] Q40. What is the due date of filing of annual return in case of composition scheme? Ans. On or before the thirty first day of December fallowing the end of such financial year. [section 44(1) of the CGST/HCST Act, 2017 and CGST/HGST Rules 2017]. Q41. Can composition tan be collected from customers? Ans. No. The registered person under composition scheme is not permitted to collect tax. It means that a composition Theme supplier can issue a tax invoice. Q42. Can composition scheme be availed of by a service supplier? Ans. The composition scheme is not available tor services sector, except restaurants. Q43. Do registered persons under composition scheme need to file fresh intimation every year for composition? Ans. No. The registered person paying tax under composition scheme need not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provision of the Act and the rules framed thereunder. Q44. Can a person opting for comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes. Your annual turnover is approximately ₹ 25 Lakh. You can opt for composition scheme which is limited to turnover of ₹ 75 Lakh in a year and you can pay tax @ 1% on this turnover. DIRECTIVES FOR MIGRATION The provisions of GST law require that all the persons registered under any of the previous taxing statutes, which have been subsumed under GST, (hereinafter referred to as previously registered persons) are liable for registration under GST as well. This process of migration is required to be completed by following a simpler method than registration for new taxable person. See Section 22(2) of the State GST and the CGST. Though the process of migration commenced in the month of December, 2016, still a lot of ground is yet to be covered for completing the task of migrating all the previously registered persons into the GST. Hence the guidelines. The process of Migration consists of following steps: Step 1. On receipt of provisional Id and password, the taxpayer has to login with this Id and password. Step 2. Process of enrolment: The taxpayer has to feed in his mobile No and a valid email id of the authorised signatory of the business entity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ETO S are required to start verifying the electronic application of the persons submitted in the form of REG-26 expeditiously. [See Rule 24 of Haryana/Central Goods and Services Tax, Rules, 2017]. A weekly report on the progress made be also forwarded to the Head Office or will be uploaded the portal of Information Exchange whenever it is developed and live. [Action point Proper Officer] As stated above, 206553 have successfully enrolled themselves and 163089 have submitted their application in form of REG-26 . So, remaining 4514 persons have so far not submitted their applications in the form of GST REG-26 duly signed and verified. Though the law provides tor period of 3 mouths to successfully enrolled persons to submit their REG-26 duly signed and verified, see Rule 24(2)(b). However, ETO may start contacting and facilitating such persons to furnish this Information expeditiously. 2. Migration of Erstwhile VAT dealers having turnover more than 20 Lac but not enrolled to GST As slated above, 43514 previously registered persons having valid PAN have not so far enrolled themselves. Out of These persons. 11880 previously registered persons had turnover of more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GTO for the year 2016-2017 Date of Visit to person/dealer Whether functional or closed (F or C) Whether Taxable Stocks under GST available (Yes or No) Whether return Q4 for 2016-17 submitted (yes or No) Remarks/Action taken for facilitation 1 2 3 Note: The points enumerated in the guidelines if separately provided in the columns may Be summarized under The column of remarks. Name of the ETO Signature the Officer - Circular - Trade Notice - Public Notice - Instructions - Office orders Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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