Composition scheme Under Goods & service Tax

1. Composition scheme under G S T
A PRESENTATION
BY
CA.N.RAMASWAMY, F.C.A.
CHENNAI-24
9840446412
nryrams@gmail.com

2. What is Composition rules in GST?
• Section 10 of the GST act provides for payment of Tax at particular
rate on the turnover of the registered person whose turnover is less
than prescribed limit., instead of rates prescribed under the Tariff.
• Not withstanding anything contrary contained in this act and
subject to sub sections 3 & 4 of section 9 of the ACT, means that
other provisions do not apply to such registered person under this
section
• Sub section 3 & 4 of section 9 deals with provision relating to
payment of tax by recipient of goods/ services which are listed by
the Central Government on the basis of recommendation of GST
council.
• so far list published appear to contain 12 entries relating to
Services and none relating to goods.
CA.N.RAMASWAMY 2

3. INTRODUCTION TO GST COMPOSITION RULE
• TO EASE THE COMPLIANCE BURDEN OF SMALL BUSINESS
• COMPOSITION SCHEME WILL MAKE IT HASSLE FREE
• BENEEFICIAL TO THE DEALER WHO DOESN’T MAKE B2B SUPPLIES i.e SUPPLIES
TO REGISTERED PERSON
• SCHEME IS OPTIONAL TO REGISTERED TAXABLE PERSON
• SHOPKEEPERS, SMALL TRADERS AND SMALL SCALE
• MANUFACTURERS ARE BEST SUITED FOR THIS SCHEME.
• PERSON EXERCISING OPTION SHALL PAY UNDER SECTION 10
• TAX SHALL BE PAID ON VALUE OF SUPPLIES @ PRESCRIBED REDUCED RATES
• RATES 1% FOR MANUFACTURER, 2.5% FOR SMALL HOTELS .5% FOR OTHERS
• QUARTERLY RETURN TO BE FILED
• LESS COMPLICATED COMPARED TO NORMAL DEALERS WHO DEPEND ON
RETURN FILING OF OTHERS TO COMPLETE THEIR OWN RETURN.
• CAN FIX COMPETATIVE PRICES.
CA.N.RAMASWAMY 3

4. ELIGIBILITY CONDITIONS
• AGGREGATE TURNOVER SHOULD BE RS. 75 LAKHS OR LESS IN PRECEEDING
FINANCIAL YEAR
• SCHEME AVAILABLE TO SUPPLY OF GOODS ONLY. SERVICES NOT ELIGIBLE
• RESTAURANT SERVICES (not serving alcoholic liquor)
• NOT ELIGIBLE IF ENGAGED IN INTER-STATE SUPPLY OF GOODS, THROUGH E-
COMMERCE OPERATORS
• CASUAL & NON RESIDENT TAXABLE PERSON CAN NOT AVAIL COMPOSITION
• FOR PERSONS REGISTERED UNDER EXISTING LAWMIGRATING ON THE APPOINTED
DAY – INTIMATION TO PAY TAX IN FORM GST CMP-01
• DETAILS OF STOCK HELD TO BE FURNISHED IN GST CMP-03 WITHIN 60 DAYS OF
EXERCISING THE OPTION
• FOR FRESH REGISTRATION UNDER GST FOR COMPOSITION SCHEME- INTIMATION
IN FORM GST REG 01
• OPTION TO PAY TAX UNDER SECTION 10 SHALL BE EFFECTVIE FROM THE
BEGINNING OF THE YEAR OR FROM THE APPOINTED DATE
CA.N.RAMASWAMY 4

5. ELIGIBILITY CONDITIONS- Contd.,
• Goods held as stock on the appointed day Should not be out of Purchase from
other states, imports from branches in other states.
• Goods held in Stock should not have been purchased from un registered Dealer. If
so held appropriate tax has to be paid.
• Shall pay tax under sub section 3 and 4 of section 9 on inward supply of goods and
services , on goods and service listed.
• Not engaged in manufacture of notified goods .
• Shall mention the words “ composition Taxable person ” on notice or signboard,
displayed at all hi offices.
• Shall issue Bill of supply containing details as prescribed instead of invoice
• 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;
CA.N.RAMASWAMY 5

6. ELIGIBILITY CONDITIONS- Contd.,
• Option to pay tax under section 10 to be exercised by intimation through
furnishing a form GST CMP-1for migrated persons . For others IN GST CMP-2
• The option ONCE exercised shall remain valid so long as he satisfies all the
conditions mentioned in the said section and these rules.
• Shall furnished details of stock held on the appointed date in form GST CMP-3
giving such other details as may be called for with in sixty days.
• If the conditions are not fulfilled, shall be out of composition , to file intimation of
withdrawal and pay full tax under section 9. Form GST CMP-4 to be filed.
• Proper Officer may after verification issue notice to show cause why the option
can not be rejected. Reply is to be given. If not satisfied/ if contravened , order can
be issued denying the composition schemes.
CA.N.RAMASWAMY 6

7. OTHER CONDITIONS.
• Once the option is withdrawn or order issued denying the option exercised , the
taxable person shall become a normal taxable person, liable to pay tax under
section 9
• 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 30 days, from the date from which the option is withdrawn or
from the date of order passed in FORM GST CMP-07, as the case may be.
• The registered person paying tax under section 10 may not file a fresh intimation
every year
• and he may continue to pay tax under the said section subject to the provisions of
the Act and these rules.
CA.N.RAMASWAMY 7

8. Who can not choose Composition scheme.
• Who is engaged in the supply of services (for example AMC services, Manpower
supply services etc.)
• Who makes any supply of goods which are not leviable to tax under this Act
• Who makes any inter-State outward supplies of goods.(for example from Rajasthan
to Haryana)
• Who makes any supply of goods through an electronic commerce operator who is
required to
• collect tax at source under section 56(for example through Flipkart, Amazon etc.)
• Who a manufacturer of such goods is as may be notified on the recommendation
of the Council.
• All the registered taxable persons, having the same PAN as held by the said taxable
person, also opt to pay tax under the provisions of this sub-section.(for example all
the units of traders in same or different state opt for composition)
• If the aggregate turnover exceeds 75 lakhs, the scheme will be deemed to be
withdrawn & consequences will follow.
CA.N.RAMASWAMY 8

9. Comparison of Regular with Composition scheme.
Sr.No Points of distinction Regular tax payer Composition Scheme
1 Thrush Hold of aggregate Turnover Rs. 20.00 Lakhs Rs, 75.00 Lakhs
2 Issue of documents for supply Invoice Bill of supply
3 Eligibility to ITC Yes NO
4 Tax liability Regular per Schedule Rates Special reduced rates as per
notification
5 Eligibile to collect tax from customers Yes No
6 Returns- GSTR-1 10th of the following month Not applicable
7 Returns- GSTR-2 15th of the following month Not applicable
8 Details of ITC, Final return etc GSTR- 3 20th of the following month Not applicable
9 Consolidated Quarterly return GSTR-4 Not applicable 18th day of the month afte the
Quarter Concerned.
10 Annual Return GSTR – 8 31st Dec of the following
year
31st Dec of the following year
CA.N.RAMASWAMY 9

10. Cost benefit analysis for Composition schemes.
Sr.No Normal Scheme Rs. Composition Schemes Rs.
1 Sale Price inclusive of
tax(18%) including Tax of
Rs.18000/-
1,18,000/- Sale Price customer
gets . Tax tobe 18000-
14400paid by Dealer
on Rs.118000/-
1,18,000/-
2 Cost of Purchases 80000/- Cost of Purchases 80000/-
3 Tax on Purchases(18%) 14400/- Tax on Purchases(18%) 14400/-
4 Total purchases 94400/- Total purchases 94400/-
5 GST Liability[18000-
14400]
3600/- GST Liability[1% on
118000/-]
1180/-
6 Profit earned [1-4-5] 20000/- Profit earned [1-4-5] 22420/-
7 Additional profit - [22420-20000] 2420/-
CA.N.RAMASWAMY 10

11. Rate Schedule under composition schemes.
CA.N.RAMASWAMY 11
Sr.No Category CGST SGST Total
1 Manufacturers, other than
manufacturers of such
goods as may be notified by the
Government
1% 1% 5%
2 Suppliers making supplies
referred to in clause (b)
of paragraph 6 of Schedule II
2.5% 2.5% 5%
3 Any other supplier eligible for
composition levy
under section 10 and these rules
0.5% .05% 1%