New composition Scheme under GST

Composition Scheme under GST

Composition Scheme under GST- Key Highlights

  • A taxpayer whose aggregate annual turnover is below Rs 1.5 crore* can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is Rs 75* lacs.

  • The composition dealer enjoys high liquidity as taxes are at a lower rate (1% -6%) but no Input Tax Credit on purchases can be claimed by the composition dealer

  • The composition dealer has to issue a Bill of Supply. They cannot issue a tax invoice since they cannot charge tax from the customers

  • The dealer can carry out business within the state only. The dealer is barred from carrying out inter-state transactions

  • The composition dealers will not be eligible to supply goods through e-commerce portals
  • A composition dealer is required to pay tax in a quarterly statement CMP-08 by ~18th of the month after the end of the quarter

  • A return in form GSTR-4 has to be filed annually by ~30th April of next financial year

  • The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business

  • The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him

  • The taxpayer still has to pay tax at normal rates for transactions under the Reverse Charge Mechanism and tax on purchases from an unregistered dealer

  • To opt for composition scheme a taxpayer has to file GST CMP-02 with the Government

  • The following people cannot opt for the scheme
    • Manufacturer of ice cream, pan masala, or tobacco
    • A person making inter-state supplies
    • A casual taxable person or a non-resident taxable person
    • Businesses which supply goods through an e-commerce operator

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