July 2

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Understanding GST Composition Scheme: Application and Eligibility

Small taxpayers may either pay goods & services tax under a composition scheme or under a standard scheme by registered GST. Although most of the taxes can be paid under the standard regime, GST can also be charged via a composition scheme. Let’s get it into depth.

GST Composition Scheme

Any registered individual under the GST can choose this tax-paying scheme. It helps the taxpayer to pay the supply tax at a fixed rate even though they are taxed at a higher rate. While this is a lucrative choice for traders, the individual may apply for the GST composition scheme.

GST Composition Scheme Application

1. A business can apply for the composition scheme while registering according to the GST law. If so, the GST composition scheme is compatible with GST registration in India simultaneously.

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2. Application for the GST composition scheme when moving from previous laws where it is applicable from the date of registration itself.

3. A business owner can also select a GST composition scheme before the start of a financial year in which thone wishes to exploit the scheme. In this scenario, the scheme’s effective date starts from the next financial year.

Although businesses tend to make the most of the registration of the GST composition system, it is also likely that you pay for it when not registering. Unless the GST is charged without being considered for the composition program, the following shall apply.

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Additional tax payment (as provided for in the scheme) + Fine payment (in compliance with sec. 73 and 74, which deal with fraud or non-fraud applications).

Here are some scenarios wherein the businesses can avail the opportunity of Composition scheme lapses, or in case the permission is rejected.

I. The turnover threshold is reached,

OR

II. If the registered individual does not meet the composition scheme requirements,

OR

III. If the appointing officer determines that the applicant seeking to benefit from this scheme is not eligible.

Another fundamental problem occurs if the registered person leaves the composition scheme and wishes to re-enter after withdrawal.

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In such a situation, taxpayers can not return to the composition system before the financial year ends.

Additional criteria include; 

I. Filing a withdrawal scheme intimation within seven days of non-compliance with the conditions stated, 

OR

II. Filing a scheme withdrawal intimation at any time within the current financial year but before the effective withdrawal date (if such withdrawal is willing).

A significant update in the comp composition scheme as per April 2019:

Unlike before, the composition scheme is open to all service providers and not only for restaurant business operators. Small businesses that have a turnover of over 50 lakhs can now leverage a composition scheme that applies to qualifying taxpayers under the same conditions as other taxpayers. This also requires the use of incentives in the composition system for other donors. For this reason, the tax rate is 6% (3% SGST + 3% CGST).

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Composition Scheme Taxpayers – Major Compliance

Companies seeking to benefit from the composition scheme will need one to send the financial statement of that particular financial year in Form GST CMP-08. For each quarter, the tax must be charged for the specific quarter by the end of next month’s 18th. These companies must file GSTR-4 for GST annual return on or before the 30th April post-financial year-end. Small taxpayers, therefore, have the option to go to the standard GST or the composition scheme.

Eligibility to Opt for GST Composition Scheme

The maximum turnover for any business looking to avail the benefits of the GST composition scheme should be up to ₹1.5 crores in a particular financial year. The same is ₹75 lakhs for the businesses in the following states:

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·       Arunachal Pradesh.

·       Manipur.

·       Meghalaya.

·       Mizoram.

·       Nagaland.

·       Sikkim.

·       Tripura.

·       Uttarakhand.

Points to keep in mind while calculating aggregate turnover

Note I. Services provided by an extension of deposits, loans, and loan advances are omitted when calculating aggregate turnover, including interest or discount considerations.

Note II. The latest provisions of GST law involve a producer or broker licensed for their operation in the Composition Scheme. These services should be no more than 10 percent (the previous financial year) or 0.5 lakhs worth of turnover – the higher value is considered here.

Conclusion

The composition program certification will help you maximize the incomparable advantages. Some of these include;

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– The need for just lower enforcement

– Higher tax liquidity at lower levels, such as records keeping, invoicing, return filing, etc. 

– Tax liability is limited.

Furthermore, dealers who successfully sign under the composition system do not have to keep accurate records.


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