GST composition scheme which is subjected to give relief to small businesses can be mold to new forms as GST Council is trying to make it more attractive and comprehensive for traders. It is expected that the composition scheme can include inter-state supplies of goods to benefit small businesses. The composition scheme under GST can be utilized by any taxpayers whose annual turnover is not exceeding Rs. 1 Crore.
The scheme offers easy compliance and a single rate of tax to be paid in a quarter instead of monthly returns. The Council can make it easier by including the benefits of input tax credit as now the traders are not getting the ITC benefits by trading with composition dealers. A five-member meeting lead by Assam finance minister Himanta Biswa Sarma will decide the improved structure of composition scheme in its next meeting which is going to take place on Sunday.
November 10 Meeting of GoM
The GoM will decide on revising the composition scheme by considering the reviews from representative of small and medium industries. In the second meeting of GoM, it is decided to lower the tax rates for restaurants from existing 18% to 12% and roll back the input tax credit facility. The final approval on the decision will be taken by November 10 meeting of GoM and after that, the proposal will be put in front of GST council for consent.
A panel member said, “Many small and medium players are hesitant about opting for the composition scheme as they worry that large players will stop buying from them. This needs rectification.” on the issue, Pratik Jain (PwC India) said, “If input tax credit is to be given, the contours of the scheme will need to change wherein composition dealers will have to show tax on invoice and file regular GST returns, unless some kind of a deemed credit mechanism is worked out.”
The five-member panel will decide by considering whether the annual turnover of exempted goods under GST would be put out from the total threshold limit for imposing a tax under the composition scheme or not. The final decision will be unanimously based on the conclusion of the GoM meeting ahead of the GST council meeting.
All About Composition Scheme
In the 22nd meeting of GST Council chaired by the FM, the annual threshold limit for the small businesses under Composition Scheme has been raised from Rs. 75 lakh to Rs. 1 Crore. The scheme facilitates businesses with a flat rate and quarterly filing of tax instead of monthly return filing like normal taxpayers. The last date for closing the window extended from October 1 to March 31. This scheme has been revised twice since the GST rolled out.
Under the composition scheme, traders need to pay GST at 1% rate, a manufacturer at 2% and a restaurant owner at 5% without availing the input tax credit. Out of the total 8.9 million registered taxpayers, 1.5 million have opted for composition scheme. The composition dealers don’t provide the tax invoice and the traders who buy from composition dealers couldn’t claim the input tax credit on the supply of goods. The scheme is only valid for intra-state transactions and inter-state transfers cannot avail the benefits.
The taxpayers registered under composition scheme are required to file quarterly return form GSTR-4 and an annual return form GSTR-9A and need not furnish the invoice-wise details or HSN (harmonized system of nomenclature) codes.
Revenue Secretary Hasmukh Adhia also agrees to ease the compliance for composition scheme dealers and in an interview with Press Trust of India, he said, “There is a need for harmonisation of items chapter-wise and wherever we find there is a big burden on small and medium businesses and on a common man, if we bring it down, there will be better compliance.”
Who cannot avail the benefits of composition scheme?
- Service providers (except restaurants)
- Dealers and manufacturers doing Inter-state sales
- Business with turnover exceeding Rs. 1 Crore
- Traders availing Reverse charge benefits cannot opt for the scheme
- Taxpayers who pay TDS cannot avail the composition scheme
- The traders who sell the exempted goods under GST
- Manufacturer of ice cream
- The traders who supply the notified items mentioned by the government
