GST composition scheme

GST Composition scheme – what is it?

GST Composition scheme is where you pay tax based on a smaller tax as a percentage of your turnover. But the downside is that you cannot take any input tax credit. For example, If you sold goods worth Rs. 800,000 in a month you would be paying GST of Rs. 8,000 calculated at 1% of the turnover. However, if you were under the regular scheme, you would end up paying 27,000 at 18% (assuming your purchased the goods at Rs. 650,000 and claimed input tax credit of Rs. 117,000).

Although this looks very lucrative, its important to know the intricacies in the GST composition scheme to find out the pros and cons and if you are even eligible for it.

Who can enroll for the Composition scheme?

Not everybody is entitled to opt for the composition scheme. You are barred from going for composition if –

  1. You are dealing in exempt commodities
  2. You are supplying services for a value exceeding Rs. 5 lakh or more than 10% of your turnover
  3. You manufacture ice cream, tobacco, pan masala
  4. You are a casual taxable person or a non resident taxable person
  5. You supply goods on an ecommerce portal such as Amazon, Flipkart, Snapdeal, etc.
  6. You are selling goods out of your home state

Conditions for availing Composition scheme:

  • You cannot collect any tax from your customers. Tax will have to be paid out of your own pocket.
  • You need to issue a Bill of Supply instead of a Tax Invoice
  • Input credit on purchases cannot be availed
  • The words ‘Composition Taxable Person’ have to be mentioned in your premises
  • All your businesses under the same PAN have to simultaneously apply for Composition scheme

How to opt for Composition scheme?

  • Go to the GST portal
  • Go to Services -> Registration -> Application to opt for Composition levy
  • Tick all the boxes and submit using DSC or EVC.

What are the returns to be filed?

Quarter returns in GSTR-4 are to be filed by 18th of the next month after end of the quarter. For example, the return for Jul-18 to Sep-18 is to be filed by 18th October 2018. Additionally an annual return in GSTR-9A is to be filed by 31st December of the next year.

What is the rate of tax for Composition scheme?

Depending upon your type of business, you will have to pay tax at the rates given below:

Composition scheme tax rate

 

 

Completed various post qualification courses hosted by Institute of Chartered Accountants of India (ICAI) such as  Information Systems Audit (DISA)  Concurrent Audit of Banks  Goods & Services Tax  Blockchain and other emerging technologies  Primarily handling Indirect Taxation vertical with focus on GST.  Proficient in handling litigation in legacy taxes such as MVAT & CST upto Maharashtra Sales Tax Tribunal stage.  Inventory audit of listed companies throughout various locations in Maharashtra.  Management consultancy and Tax planning services.  Advisory and consultancy to Startups on cash flow management, funding sources  Retirement and Inheritance planning, Estate management consultancy.  Experience in Capital gain taxation and tax planning  Specialization in E-commerce retail segment  Risk advisory  Bank Concurrent Audit Experience