Introduction of Composition Scheme in GST - GST Ready Reckoner - GST

Composition Levy Scheme in GST 1. Overview of the Scheme The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to ₹ 1.5 Crores (₹ 75 lakhs in case of special category state ). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate. 2. Benefits of composition scheme Easy compliance as no elaborate accounts and records to be maintained Simple Annual Return Quarterly payment of tax 3. Disadvantage of Composition scheme A limited territory of business, as the dealer is barred from carrying out inter-state transactions No input tax credit is available to composition dealers The taxpayer will not be eligible to supply non-taxable goods under GST such as alcohol and goods through an e-commerce portal. Other point to be considered The option availed of by a registered person under section 10(1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under section 10(1). A taxable person to whom the provisions of section 10(1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax. If the proper officer has reasons to believe that a taxable person has paid tax under section 10(1) despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall apply for determination of tax and penalty.