What is the Composition Scheme under GST?
Created on 19 Aug 2018
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Updated on 11 Sep 2022
On July 1st, 2017 the Government of India announced GST to be applicable throughout the territory of India including the State of Jammu and Kashmir. At first huge resentment was shown by the public to the GST being applied as some were in a state of confusion that how to apply GST over their regular methods of applying service tax and some were worried that how will they now be able to evade tax liability. But the small dealers who were eligible to pay tax were the ones in the most disturbed state of mind as to whether the provision of composition scheme under service tax will be repealed or will continue to operate under the new Goods and Services Act, 2017.
How Composition Scheme operates under GST?
Before GST, registered small dealers used to avail benefit under composition scheme while making payment of service tax as the purpose to provide such composition scheme was to give relaxation to small dealers and charge more from the big service tax payers so that the pressure can be lifted off of small dealers.
Who are eligible to opt for composition scheme?
The dealers usually the small dealers whose aggregate turnover is does not exceed 1.5 crores are eligible to opt composition scheme. Provided such dealers must be registered with the authorities.
Who can’t opt Composition Scheme?
1. Service providers aren’t allowed to opt composition scheme.
2. Tax payers whose turnover is more than Rs.1.5 crores.
3. Those who are eligible to perform inter-state sales.
Disadvantages of Composition Scheme
1. Dealers can’t do interstate sale.
2. It is not available for service providers.
3. If the turnover increases Rs.1.5 crores, they will no longer be eligible to operate under composition scheme.
The small dealers registered under the composition scheme under GST are given the following benefits:
1. The small dealers registered under the composition scheme and manufactures goods are required to pay only 1 percent of tax which is a big relief for small dealers and they are also motivated to pay tax even at this 1% and contribute their share for the welfare of the people.
2. The burden is removed from the shoulders of small tax payers and is shifted to the big tax payers.
3. Lesser record work is done in this such as keeping track of invoices etc.
4. Limited tax liability of registered small dealers.
Returns filed by dealers under composition scheme
A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter i.e. after the expiry of 3 months. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year.
GST was applied with a view to reform the economic system of India and to impose one tax to be charged throughout the territory of India i.e. “one nation one tax”. As per the data released by Ministry of Finance, around 1 crore tax payers have registered under GST as on 24 January 2018 and out of which 17.11 lakhs were those registered under the composition scheme.
To know mroe about GST, Click here.
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