Composition Scheme is a big relief for small traders and simple scheme for small taxpayer.
How Composition Scheme is beneficial for small taxpayer?
- Small taxpayer can get rid of GST formalities and pay tax at a fixed rate on turnover after GST Registration.
- Under this Scheme a payer is required to file summarized returns on Quarterly Basis instead of three-monthly returns.
- We required to file only 2 Returns on a quarterly Basis and annual return.
- No need to maintain detailed records as in case of normal taxpayer, so there is additional benefit.
- A registered Taxpayer, who is registered under the Composition Scheme Will pay tax at a rate of:
- 1% for manufacturers
- 1% for other suppliers of turnover.
- 5% for Restaurant Sector.
- Applicant who come under composition scheme must have GST registration.
- A registered taxpayer whose aggregate turnover is less than 1.5 crore or 75 lakhs in some states.
- Business dealing only in goods not in services but except restaurant services.
Taxable persons excluded from the scheme
- People making supply of goods interstate. So, if someone is making interstate supply, then he has to get registered under regular scheme.
- Supply through E-commerce operation.
- Not to manufacture tobacco.
- Not a Casual taxable persons or non-resident taxable persons.
If a taxable person has different business segment having same PAN so, he/she must be registered all such business under the scheme.
- We cannot make interstate supply under composition scheme.
- Under this scheme registered persons cannot avail the benefit of Input Tax Credit, so it would become part of cost.
- Issue bill of supply instead of Tax invoice.
- Person under composition scheme should have their own business in their own state.
- Under composition scheme, option to pay tax lapses from the day on which his total turnover exceeds the specified limit.
- If an applicant withdrawal from the scheme he has to file GST return within seven days when their threshold limit has been crossed.