Composition scheme for small taxable persons supplying goods :
GST requires heavy compliance cost due to detailed accounting and paper work involved.
Small taxable persons do not have sufficient knowledge and expertise to comply with the requirements relating to records and accounts.
Hence, for them, a simplified composition scheme has been provided, vide section 10 of CGST Act.
The scheme is available to those whose aggregate turnover of supply of goods in a financial year does not exceed Rs 50 lakhs. This limit can be extended upto Rs one crore by issuing notification, on recommendation of GST Council.
The scheme is not available to supplier of services.
The proposed rates are as follows[section 10(1) of CGST Act]-
(a) 1% of turnover in State or Union territory in case of a manufacturer
(b) 2.5% of turnover in State or Union territory in case of persons engaged in making supplies referred to in para 6(b) of Schedule II of CGST Act [restaurant service]
(c) 0.5% of turnover in State or Union Territory in case of other suppliers [i.e. traders]
[There will be equal SGST. Thus, total tax payable will be double the aforesaid rates].
The scheme is optional.
The option lapses on the day his aggregate turnover exceeds the specified limit – section 10(3) of CGST Act.
All registered taxable persons having same PAN number should opt for the composition scheme.
The taxable person opting for composition scheme will have to pay a fixed percentage of gross turnover as tax,
Taxable persons whose all supplies of goods and services are within the State only will be eligible for the simplified scheme.
Taxable persons who opt for composition scheme will not be allowed to charge GST in their invoice. They cannot show GST in their invoice. They are not entitled to any input tax credit. [section 10(4) of CGST Act]
Meaning of ‘aggregate turnover’ – “Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of a person having the same Income Tax PAN, to be computed on all India basis and excludes taxes [CGST, SGST, UTGST and IGST – section 2(6) of CGST Act.