Chapter 3 - Charge of GST - Composition Levy Flashcards
composition scheme is governed by which section under CGST Act 2017
Section 10
what is the purpose of composition scheme?
- Composition scheme is an initiative undertaken to reduce the compliance and tax burden on small scale businesses.
what are the 2 types of composition scheme ?
Type - 1. Composition scheme for specified persons.
Type - 2. Composition scheme for other service providers
what is the threshold limit for seeking registration under composition scheme (Type 1) ?
A registered person whose “aggregate turnover” in the preceding FY does not exceed 1.5 crores can opt the composition scheme for the current FY.
The aforementioned limit of 1.5 crore becomes 75 lakhs in case of the following special category states :- (MANTUS)
Manipur
Meghalaya
Mizoram
Arunachal Pradesh
Nagaland
Tripura
Uttarakhand
Sikkim
Define the term “Aggregate turnover” as per CGST act 2017
As per section 2(6) - aggregate turnover :-
Includes - Value of all :-
a. outward supplies
b. Taxable supplies
c. Exempt supplies
d. Inter - state Supplies
e. Exports
computed on all india basis of persons having same PAN.
Excludes :-
a. GST component (CGST SGST UTGST ITGST and any Cess)
b. Value of all inward supplies on which tax is payable under RCM.
c. Value of exempt service by way of accepting deposits or extending loans the consideration for which is in the form of interest or discount.
When can a person opt for composition scheme (Same for both types) ?
an unregistered person can opt for composition scheme at the time of registration during any point of time in the FY in Part B of Form - REG-01 whereas,
In the case of a registered person the option for composition scheme shall be exercised before the commencement of FY for which the scheme is being opted by filing an intimation electronically in form GST CMP - 02 along with statement. (will be discussed in detail in ITC chapter).
Who “can” opt for composition scheme (Type 1)?
only the following persons can opt for composition scheme :-
1) manufacturers other than manufacturers of following goods :-
a) Pan Masala
b) Tobacco or tobacco substitutes
c) Ice cream or any other edible ice whether or not containing cocoa
d) Aerated water
e) fly ash bricks or fly ash aggregate or fly ash blocks
f) Bricks of fossil metals or siliceous earths
g) building bricks
h) earthen or roofing tiles ;
2) Traders or suppliers of goods ;
3) Restaurant and catering service providers.
what are rates of GST for persons under composition scheme (Type 1) ?
The rates of GST are as follows :-
1) In case of manufacturers :- 0.5% (CGST) + 0.5% (SGST/UTGST) of the turnover in State/UT
2) In case of Traders/ Suppliers of goods :- 0.5% (CGST) + 0.5% (SGST/UTGST) of the turnover in State/UT
3) In case of Restaurant ad catering services :- 2.5% (CGST) + 2.5% (SGST/UTGST) of the turnover in State/UT
What are the various conditions/ obligations of a composition scheme registered person (Same for both the types)?
A person who has opted for composition scheme shall :-
a) not collect GST from the recipient.
b) not be eligible for any ITC.
c) issue Bill of Supply instead of a Tax Invoice.
d) mention Composition taxable person, not eligible to collect tax on supplies on the top of bill of supply issued by him.
e) mention the words “Composition Taxable person” on every notice or signboard displayed conspicuously.
f) opt to pay tax under composition scheme for all persons having same PAN.
Who “cannot” opt for Composition Scheme (Type 1) ?
The following persons cannot opt for composition scheme :-
1. persons dealing in goods or services which are not leviable to tax under GST (alcoholic liquor for human consumption & 5 petroleum products)
2. persons making inter-state outward supplies of G/S.
3. person is either a Casual taxable person or a Non resident taxable person.
4. persons making supply of goods/services through an ECO.
5. persons manufacturing such goods as may be notified by CG on recommendations of GSTC (Pan masala, tobacco etc.)
what is the relaxation provided to a person who opts for composition scheme (Type - 1) in respect of provision of other services?
A composition scheme registered person may provide other services in addition to their principal business (Manufacturing/Trading/Restaurant and catering) but only up to a certain limit which is as follows :-
a) 10 % of turnover in a state/UT during the preceding FY
or
b) 5 lakhs
WHICHEVER IS HIGHER
Note :- turnover stated above shall exclude the value of exempt services by way of accepting deposits or extending loans the consideration for which is in the form of interest or discount.
Explain the Composition Scheme (Type - 2).
Provided under section 10(2A) :-
1. All the persons who are not eligible to opt composition scheme under section 10(1) (Type - 1) AND have aggregate turnover not exceeding Rs 50 lakhs in the preceding FY may opt under this section to pay taxes at a rate of 3% CGST + 3% SGST/UTGST of the turnover in a state/UT.
- However the following persons cannot opt for this scheme :-
a) persons engaged in business of goods or services which are not leviable to tax under GST.
b) persons making inter-state outward supplies of G/S.
c) person who is either a Casual taxable person or a Non resident taxable person
d) persons manufacturing of such goods or supplying of such services as may be notified by CG on recommendation of GSTC.
e) persons making supply of goods/services through ECO.
All the provisions of Composition scheme (Type - 1) shall _____________ apply to Composition Scheme (Type - 2)
Mutatis Mutandis
When the composition scheme becomes effective ?
1.in case opted along with registration - from the date of registration
2. In case opted by a registered person - from the beginning of said FY.
Explain withdrawal of composition scheme.
Withdrawal of composition scheme can happen via following modes :-
a) voluntarily - any person who has opted for the composition scheme may voluntarily withdraw from the scheme by making an application in FORM GST CMP - 04
b) mandatorily - any person who ceases to satisfy any of the conditions essential for composition scheme or upon crossing the threshold limits for turnover as the case may be shall :-
1. Issue Tax invoice for every supply thereafter
2. File an intimation for withdrawal within 7 days from the occurrence of event in FORM GST CMP - 04.
