Introduction
The GST act specifies the detailed procedure for taxpayers regarding the frequency to file GST returns and also frequency to pay the taxes. There are two kinds of taxpayers under GST. GST act gives an option to tax payers whether they want to pay the taxes and file the returns under the normal or regular scheme or they want some kind of concessions. These concessions have been provided by way of introducing the Composition scheme under GST where tax payers especially small tax payers can opt for this scheme and avail the benefits given under this scheme. There are some criteria which segregate the taxpayers between who are eligible to avail the benefit of this scheme and who are not eligible to avail the benefit of this scheme. Here in this article we will focus on the eligibility criteria to avail the composition scheme, what are the benefits of compositions scheme, what returns are required to be filed and the tax rates applicable to composition tax payers.
Let us first see who can avail or register themselves as composition tax payers or you can say the eligibility criteria for composition scheme.
Eligibility Criteria for Availing Composition Scheme
All those tax payers who are dealing in GOODS can opt for composition scheme if their annual aggregate turnover (PAN based) is below 1.5 Cr. This means that if your turnover crosses the limit of 1.5 Cr then you lose the status of composite tax payer.
Those who are service providers can also now opt for composition scheme. Earlier, it was not allowed for service providers to opt for this scheme but from 01/02/2019 onwards the CBIC has notified in official gazette and allowed the service providers to opt for this scheme with a condition that they can supply the service to the extent of 10% of their total turnover of previous financial year or 5 Lakh Whichever is higher.
Who cannot avail the benefit of composition scheme
1) Those who are dealing in pan masala, ice cream or tobacco
2) Those who are selling goods/services outside the state
3) A casual taxable person or non-resident taxable person
4) Those who are selling their products or services through E-Commerce operator
Conditions for availing benefit of composition scheme
Those who want to opt for composition scheme must satisfy the following conditions in order to stay eligible for this scheme:
1) Taxpayer cannot avail Input tax credit
2) Taxpayer cannot supply outside the state
3) Regular rate of tax will be applicable for those transactions where taxpayer needs to pay tax under Reverse charge.
4) Taxpayer must write “Composition tax payer” on sign board of registered place of business and on every documents such as invoices/credit note/debit note etc.
5) This scheme is PAN based which means that all the businesses of taxpayer will be covered if he opt composition scheme in one business. He have to opt this scheme in all other businesses also.
Procedure to opt for composition scheme
The registered tax payer can opt for this scheme by filing the Form CMP-02 online on GST portal. One needs to login to their portal by inserting the login credentials and move to towards filing of Form CMP-02 under the Registration tab. This form needs to be filed at the beginning of the financial year. One cannot opt out of the scheme in the middle of the year or cannot enter the scheme in the middle of the year. The intimation in the Form CMP-02 has to be given at the beginning only.
Rates Applicable for Composition taxpayers
| Taxpayer | CGST | SGST |
| Those who are dealing in goods | 0.5% | 0.5% |
| Service providers | 3% | 3% |
| Restaurant owners (except bars) | 2.5% | 2.5% |
GST return to be filed by composition tax payer
The composition tax payer needs to file Form CMP 08 on a quarterly basis and report the sales or supplies made by them. The taxpayer needs to pay tax on those supplies at rate specified above. The due date of filing of Form CMP-08 is 18th of the next month after the end of particular quarter. For Example: for the quarter of Jan to March, the Form CMP 08 has to be file up to 18th of April. Another form called Annul Return in form GSTR-4 has to be filed annually by every composite tax payer. The detail which needs to be reported in GSTR-4 includes the invoice wise details of sales, purchase, purchase made under reverse charge mechanism and tax paid or to be paid. The Form GSTR-4 has to be filed before 30th of April every year.
Merits and demerits of composition scheme
Merits:
1) Reduces compliance burden
2) Reduced rate of tax
3) Ease of doing business
Demerits:
1) Cannot supply outside the state
2) Regular tax rates are applicable
3) Input tax credit cannot be availed
4) All the compliances needs to be carried out
5) Taxpayer cannot sell their product or service through E-Commerce portal where it is the era of online business.
Conclusion
The composition scheme under GST contains its own merits and demerits. One has to be very careful while opting in or opting out of the scheme. The detailed analysis of your business is basic necessity in order to decide whether to opt this scheme or not.
