The burden of complying with multiple Goods and Services Tax (GST) law provisions, GST return filing etc. can consume substantial time and monetary resources of small individual businessmen/ professionals. To lower the burden of legal compliance a scheme under GST was introduced by the government. This scheme is known as the ‘composition scheme under GST’.
What Is The Composition Levy Under GST?
The composition imposed under GST is an optional scheme of GST Return filing for small taxpayers with turnover up to Rs. 1.5 crore (75 Lakh for some states) in the preceding financial year. It is a scheme introduced to simplify the overall taxation for small taxpayers and also to reduce their compliance burden.
The composition scheme is optional, where the eligible taxpayers have the option of filing annual returns along with quarterly payment of taxes.
Rules Of The GST Composition Scheme?
Manufacturing businesses, service businesses, and traders are eligible to register under the GST composition scheme as per the GST Act. However, certain businesses and individuals cannot avail of this scheme. Let’s look at who they are.
- Any individual or business that distributes goods through an online shopping portal operator and is in charge of obtaining taxes at the source
- Taxable persons who are either temporary residents or non-residents
- Providers of artificial ice and Edible ice, whether concentrated or with added sugar or sweeteners.
- Producers of pan masala and tobacco products and their alternatives
- People or companies who bought products from unregistered service providers
- Providers of goods that are excluded from the GST Act
- Providers, or individuals who provide goods and services
What Are The Pros Of Composition Scheme?
- It would be to the companies’ advantage to have fewer hours dedicated to compliance chores like filing taxes, record-keeping and so on to gain more time to focus on their business.
- Small firms will stand to be helped a lot in particular by reduced taxes. Most of the small and medium enterprises are tax exempted if their annual turnover does not exceed ₹15 Lakhs This way, small and medium enterprises can competently compete in the market.
- Consumers are also able to obtain higher liquidity because there are reduced applicable tax rates indicative of lesser GST amounts that the government pays.
What Types Of Entities Or Individuals Can Be Prohibited From Opting For The Composition Scheme?
Following are the taxpayers who are unable to avail of composition levy under the GST Act:
- Small-scale taxable persons or persons who are taxable in the country but are not resident therein.
- Vendors with a combined turnover in the preceding financial year of over Rupees one lac shall. The overall CA from this for ITC would be 5 Cr (or 75 Lakh in the case of North-Eastern States and Himachal Pradesh).
- Any supplier dealing with unregistered suppliers if he has not paid GST on goods or services received from the said unregistered supplier on a reverse charge basis.
- The specific secondary service provided by the company other than restaurant service.
- Individuals and companies that have supplied the goods or services fall under the category of GST exemptions.
- Inter-state outward supplies of goods made by persons.
- Any supplier involved in the supply of goods through an electronic commerce operator who is mandated to collect tax at the source under section 52.
- A manufacturer of the following goods: A manufacturer of the following goods:
- Ice cream and other edible ice such as those that contain cocoa and those that do not contain cocoa
- Pan masala, Tobacco and manufactured tobacco substitute
Conclusion
Thus, it can be concluded that simplicity in tax procedures is one more advantage for companies of the GST Composition Scheme. It supports growth, reduces taxes, and reduces red tape. The preferred beneficiaries are the ones who get to enjoy the compliance and tax burdens which are all lowered. It has limitations for example geographical limitations and or limitations on exempt products. However, it offers a lot of perks to small businesses.
In a hectic life schedule filing for registration of composition schemes under GST may get complex. This is where Apkireturn comes in clutch as its team comprises experienced professional CAs who provide you with the best advice and guide you in your due process of GST return filing in Jaipur. Reach out to us at +91 766 515 6000.
We are a team of highly qualified Chartered Accountants and Company Secretaries with over 20 years of experience, providing prompt and efficient services tailored to meet the unique needs of our clients.
Our expertise ensures a seamless process for all your business and tax compliance needs.
