??Desk of CA. Praveen Sharma Series-616?? Super 30 Points on Composition Levy under GST.

1. Objective: The scheme aims to simplify tax compliance for small businesses by allowing them to pay GST at a fixed rate on turnover, thereby reducing compliance costs.

2. Eligibility Threshold: Businesses with an aggregate turnover of up to ?1.5 crore in the preceding financial year can opt for the composition scheme. For certain special category states, the threshold is ?75 lakh.

3. Aggregate Turnover Definition: It includes the value of all taxable supplies, exempt supplies, exports of goods or services, and inter-state supplies of persons having the same Permanent Account Number (PAN), computed on an all-India basis, but excludes central tax, state tax, union territory tax, integrated tax, and cess.

4. Inclusion of Interest Income: For eligibility determination, the value of exempt supply of services by way of extending deposits, loans, or advances, where the consideration is represented by way of interest or discount, is excluded from aggregate turnover.

5. Tax Rates:

Manufacturers: 1% of turnover in the state or union territory.

Traders: 1% of taxable turnover in the state or union territory.

Restaurants (not serving alcohol): 5% of turnover in the state or union territory.

Other Service Providers: 6% of turnover, applicable to those with turnover up to ?50 lakh.

6. Ineligibility Criteria:

Engaged in the supply of services other than restaurant services (with certain exceptions).

Engaged in making inter-state outward supplies of goods or services.

Engaged in making supplies through an electronic commerce operator required to collect tax at source.

Manufacturers of notified goods like ice cream, pan masala, and tobacco products.

7. Service Provision Allowance: Composition taxpayers can supply services up to 10% of their turnover in the preceding financial year or ?5 lakh, whichever is higher.

8. No Input Tax Credit (ITC): Composition dealers cannot claim ITC on their purchases.

9. Tax Invoice Restrictions: They cannot issue tax invoices and must issue a Bill of Supply instead.

10. Tax Collection Prohibition: Composition dealers are not permitted to collect tax from their customers.

11. Return Filing: They must file quarterly returns in Form CMP-08 by the 18th of the month following the quarter and an annual return in Form GSTR-4 by 30th April of the following financial year.

12. Payment of Tax: Tax is payable quarterly, and the due date is the 18th of the month succeeding the quarter.

13. Reverse Charge Mechanism (RCM): Composition dealers are liable to pay tax under RCM on specified purchases and cannot claim ITC on such tax paid.

14. Stock Purchase Restrictions: They should not purchase goods from unregistered suppliers. If they do, they must pay tax under RCM.

15. Transition to Regular Scheme: If turnover exceeds the specified threshold during the year, the dealer must switch to the regular scheme and comply with normal provisions from the day the limit is exceeded.

16. Multiple Business Verticals: If a person has multiple business verticals under the same PAN, all must opt for the composition scheme collectively or opt out.

17. Display Requirements: They must mention "composition taxable person" on every notice or signboard displayed at their principal and additional places of business.

18. Bill of Supply Notation: The words "composition taxable person, not eligible to collect tax on supplies" must be mentioned at the top of the Bill of Supply issued.

19. Voluntary Opt-Out: Dealers can opt out of the composition scheme voluntarily by filing Form GST CMP-04.

20. Penalty for Ineligibility: If a dealer is found ineligible for the scheme, they are liable to pay taxes as per the regular scheme along with penalties.

21. Casual and Non-Resident Taxable Persons: They are not eligible to opt for the composition scheme.

22. Inter-State Supply Prohibition: Composition dealers cannot make inter-state outward supplies.

23. E-commerce Restrictions: Suppliers making supplies through e-commerce operators required to collect tax at source cannot opt for the scheme.

24. Manufacture of Notified Goods: Manufacturers of certain notified goods, such as ice cream, pan masala, and tobacco, are ineligible.

25. Compliance Simplification: The scheme reduces compliance requirements, including fewer returns and simplified record-keeping.

In case of any query or concerns do let us know.

Ask with https://taxbotgpt.ai/ for more information.

CA. Praveen Sharma