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How to avail the benefit for Composition Scheme for Small business Under GST - Important

By Paras Mehra

( 2.36K Views) June 9, 2017

Avail the benefit of Composition Scheme under GST for small business

Introduction

If you are a small dealer, then don't worry about the GST because the government has something for you to cheer. If your turnover is upto Rs.50 lakh in a year then you can avail the benefit of composition scheme under GST. Further, if you like the article, don't forget to share to your friends becasuse a good deed does;nt cost you anything.

Let us understand the composition scheme under GST in detail:

What is a Composition Scheme under GST?

Composition levy is the benefit provided by the government for small dealers who cannot take the pain of high compliances and high maintenance of records which other normal registered dealers are liable to do. Under GST, the benefit of composition scheme can be availed by small trader who turnover is upto Rs.50 Lakh.

Conditions to avail Composition Scheme under GST?

As per section 10 of CGST, act 2017 every person whose aggregate turnover in the preceding financial year did not exceed Rs.50 lakh, may opt for this scheme.
Hence, if you are a small person and having total revenue upto Rs.50 lakh then you can avail the benefit of Composition scheme.

However, to avail the benefit of composition scheme, you must fulfil the following conditions

Composition Scheme only for trader/Manufacturer and not for Service Providers: If you want to avail the benefit of composition scheme then you must be a trader or manufacturer of goods. You can avail the benefit of composition scheme if you are dealing with services.
No interstate sales allowed: If you are selling goods outside the state then you cannot claim the benefit of composition scheme.

Dealing in taxable goods: If you are dealing in goods which are exempt from tax then also you cannot claim the Composition benefit.

Not an e-commerce Seller: If you are selling goods on e-commerce portals like Flipkart or Amazon, then you cannot claim the benefit of Composition scheme.

Tax rate for Composition Scheme under GST

The person eligible to composition supply shall pay tax on the basis of the following table:

S No.	Category of Registered Person	Rate of tax
1.	Manufacturers, other than manufacturers of such goods notified by the government	1%
2.	Supplying by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration	2.5%
3.	Any other supply	.50%

How to opt for Composition scheme under GST?

Composition scheme is not automatic and hence, you must adhere to the following steps so that you can complete all your responsibility correctly:

#Step No.1 – Apply for intimation if you are an existing dealer (Registered under VAT, Excise)

If you want to avail the composition scheme, then you should file the intimation in Form GST CMP – 01 duly signed on the common portal within 30 days.This form is only for the people who are existing taxpayers and registered under VAT, excise etc.

For Freshly registered under GST

If you are newly registered under GST and you want to claim the benefit of composition scheme, then you can do it by filing the intimation in form CMP - 02 during the registration process.

#Step 2 – File GST ITC 3

Under this stage, the person shall furnish the FORM GST ITC 3 within 60 days from the commencement of the relevant financial year. This return is filed to submit the record to the government for stock lying with the assessee and that he will not avail the benefit of composition scheme.

#Step 3 – Furnish the details of stock

Any person who opted for composition scheme shall furnish the details of stock, including the inward supply of goods received from the unregistered persons held by him in form GST CMP – 03 within 60 days of the date on which option for composition scheme is exercised.

Important point: Any intimation filed above in respect of any place of business in any state or Union territory shall be deemed to be intimation in respect of all other places of business registered with same PAN.

Other Important restriction on Composite dealer under GST

Every person who has opted to pay tax under composition scheme shall comply with the following conditions:

1. You should not be a Casual Taxable person or you are Non resident Taxable Person

Casual taxable person means a person who occasionally undertakes the transaction involving the supply of goods and services.
Non-resident taxable person means a person who occasionally undertakes the transaction involving the supply of goods and services. but who has no fixed place of business or residence in India

2. No interstate purchased stock should be there with you

The goods held in stock by him have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State on the date once GST is notified.

In other words, the supplier should not have any stock purchased from any other state or from any other country on the day when GST is notified.

3. You should not deal with unregistered person under GST

The person should not buy goods from any unregistered supplier or if he purchases, then he shall be liable to pay tax under reverse charge. Further, this tax is different from the composition scheme.

Reverse charge means when the recipient of goods/services is liable to pay tax on the same.

4. Different invoice to be issued

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.

6. A requirement of sign board to be placed at all places of business

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.

7. He shall pay tax on inputs and shall not claim the ITC

While he has to purchase goods from the registered dealer and he shall not be liable to claim the ITC on the said inputs.

Validity of composition scheme under GST

This is also one of the most important aspects of composition scheme because if you have opted for composition scheme under GST, then you should aware of its validity as well.

Here are the following points:

Unlimited Validity: Composition scheme does not expire with time. If you are a dealer covered under composition scheme then it shall remain valid until any non-compliance is done.

Voluntarily Withdrawal: If you want to withdraw from the composition scheme and want to pay tax normally, then you can need to file FORM GST CMP - 04.
Withdrawal by Government: If government finds you with any non compliance, then it shall revoke the benefit and shall send you the intimation in FORM GST CMP - 05.
File Statement of Stock for ITC: If a person has opted out of the composition scheme then he shall file a statement of stock containing the details in FORM GST ITC – 01 within 30 days from the date from which the option is opted out.

Conclusion

We have read out the latest rules on composition scheme released by the government of India. In case you have any query, please email us at info@hubco.in.

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