GST Composition Scheme

Who is eligible for composition scheme?

All businesses that have a turnover below Rs. 1.5 crore can opt for composition scheme. For the states from the North-East and Himachal Pradesh, the limit is Rs. 75 lakh.

If the turnover of a business crosses the above mentioned limit, then said business will need to register for the regular GST scheme.

As per the 23rd GST Council Meeting held on 10th November 2017 and its further amendments the following changes to composition scheme were decided:

Eligibility for composition scheme has been extended to Rs. 1.5 Crore (maximum limit of Rs. 2 crore under the law)
There will be a single rate of tax of 1% both for manufacturers and traders.
Turnover of exempted goods will be excluded when calculating the turnover for GST payments.
Composition scheme dealers who supply services can do so for a sum of up to Rs. 5 lakh/annum

Who cannot opt for Composition Scheme?

There are certain categories of people who cannot opt for this scheme:

Taxpayer supplying exempt supplies
Casual taxable person or a non-resident taxable person
Businesses that supply goods through e-commerce
Other service providers apart from restaurants

What are the conditions under composition scheme?

These conditions have to be satisfied to be able to apply for the composition scheme:

No input tax credit can be claimed by a dealer under composition scheme
Inter-state supply of goods cannot be made under the composition scheme
The transactions under reverse charge mechanism will be charged at normal rates
If a taxpayer has different businesses under the same PAN (electronics, textile,groceries), they have to register all businesses under the scheme collectively
The taxpayer need to have the words “composition taxable person” on every signboard and notice display visible at their place of business
On each bill of supply issued by the taxpayer, the words “composition taxable person” have to be present on it
Those who supply goods can also provide services of up to Rs. 5 lakh per annum

How do composition dealers make invoices?

A composition dealer cannot raise a tax invoice because they cannot charge tax from their clients. The tax they pay will be taken from their own pockets.

This means a dealer has to issue a bill of supply.

Said dealer also has the obligation to mention at the top of their bill of supply “composition taxable person, not eligible to collect tax on supplies”.

What are the GST composition scheme rates?

Type of business	CGST	SGST	IGST
Manufacturers and Traders of goods	0.5%	0.5%	1%
Restaurants not serving alcohol	2.5%	2.5%	5%
*Service providers cannot apply for composition scheme

How are GST payments done by composition dealers?

GST payments need to be made out of the pocket of the suppliers, as they cannot charge taxes from their clients.

The GST payments of composition dealers are comprised of :

GST on supplies made
Tax on reverse charges
Tax on purchases from unregistered dealers.

What returns does a composition dealer need to make?

A composition dealer needs to file a quarterly GSTR-4 by the 18th of the month after the end of the quarter. Also, they need to file the annual return GSTR-9A by the 31st of December of next financial year.

According to the latest updates of the 23rd council meeting on 10th November 2017:The due date for GSTR-4 for the quarter of July - September 2017 is extended to 24 Dec 2017.

Note: Sleek Bill gst billing software supports all 3 taxation types: GST, Composition and non-gst.

GST Explained

What is GST bill?

GST, short for Goods and Services tax, is a new tax that will be imposed on the sale and purchase of goods and services in India. GST is meant to replace all taxes in India with a single unified tax applied to value addition instead of the total value of the product at each stage in the supply chain.

This method provides credit for the input tax paid on the purchase of goods and services, which can be offset with the tax to be paid on the supply of goods and services. As a result, this reduces the overall manufacturing cost, with the end customer paying less.

Which goods and services are exempted from GST?

With certain current taxes remaining, the following goods and services will be fully or partially exempted from the GST

What are the GST benefits for your business?

Free movement of goods: Business owners will be able to sell more in other states without having to worry about interstate transaction costs. With GST, the entry tax will be eliminated, which will save time and money spent.

What taxes does GST replace?

Currently, there are many indirect taxes that both the state and central governments are collecting on every purchase and sale.

How will GST work in practice?

The GST will follow a similar model with the one before it

What is the proposed GST rate?

GST will have a 4-tier tax structure

Why is GST being introduced in India?

One of the main reasons for GST being introduced in India is the tax burden that falls both on companies and consumers. With the current tax system, there are multiple taxes added at each stage of the supply chain, without taking credit for taxes paid at previous stages. As a result, the end cost of the product does not clearly show the actual cost of the product and how much tax was applied. This cascading structure is too complex and inefficient.

How will Inter-state transactions work in GST?

For inter-state transactions, the Centre will levy Integrated GST (IGST), which is equal to the average of the CGST and SGST rates. After applying IGST, CGST and SGST credits received from purchases, the seller will then pay the remaining IGST on the added value.

What is the exemption limit in the GST?

Businesses with turnover revenue of 20 lakhs and above will have to register and file for GST returns, with a threshold of 10 lakhs for businesses in the north east and hill states.

How will imports be handled in GST?

A combination of CGST and SGST will be applied to the import of goods and services that come to India. Tax benefits and credits will be given to the state where the imported goods and services are consumed.