Table of Contents
1. To whom does composition levy apply under GST?
- The Composition scheme under GST is an alternative method of levy of tax especially for small tax payers whose aggregate turnover does not exceed Rs.1.5 crore in the previous financial year. However, in case of special category states the limit is Rs.75 lakh.
2. What are the special category states covered under the composition scheme?
- Arunachal Pradesh
- Assam
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Himachal Pradesh.
3. What does aggregate turnover mean under composition scheme?
- Aggregate turnover includes the value of all taxable supplies, exempt supplies, export of goods or services or both & inter-state supplies but excludes the value of inward supplies on which tax is payable by a person on reverse charge basis, Central tax, State tax, Union territory tax, Integrated tax and cess.
4. When will a person opting composition scheme pay tax?
- A composition tax payer will have to pay the respective tax liability on a quarterly basis through FORM GST CMP-08 on or before 18th of the month succeeding the end of the quarter during which the supplies were made.
5. Can a composition tax payer claim input tax credit?
- A Composition taxpayer will not be eligible to claim input tax credit on purchases made by him.
6. How will input tax credit be treated when a person switches from normal tax regime to composition scheme?
- In case, a person paying tax under the normal tax regime switches to composition scheme, he will have to pay an amount equal to ITC in respect of the inputs held in stock on the day immediately preceding the date of change in status.
7. What does a composition tax payer issue in lieu of tax invoice?
- A composition tax payer issues a bill of supply in lieu of tax invoice.
8. What are the tax rates to be adopted by composite dealers?
| S. No | Applicable To | Rate of Tax(CGST) | Rate of Tax(SGST) |
|---|---|---|---|
| 1. | Manufacturer | 0.5% of state turnover | 0.5% of state turnover |
| 2. | Supplier of restaurant service | 2.5% of state turnover | 2.5% of state turnover |
| 3. | Traders or any other supplier | 0.5% of taxable value of state turnover | 0.5% of taxable value of state turnover |
9. Does the composition scheme offer any kind of benefit to small tax payers?
- Yes, the composition scheme was introduced to provide a very simple and hassle free compliance scheme for small tax payers where they need not maintain elaborate books of accounts, file quarterly returns and make quarterly payment of tax.
10. who are not eligible to opt for composition scheme under GST?
- Suppliers of service, except supplier of restaurant service.
Note: (i)A composition tax payer can also supply services provided the value of such supply does not exceed 10% of turnover in a State or Union territory in the preceding financial year or 5,00,000 (whichever is higher) (as per CGST(Amendment) Act,2018).
(ii) For computing the value of supply of service for the above mentioned provision, the value of Exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be included.
- Persons engaged in making supply of goods or services, which are not taxable under GST (eg. petrol, diesel, alcoholic liquor for human consumption etc.)
- Persons engaged in making inter-state outward supply of goods or services,
- Persons engaged in making any supply of goods or services through an e-commerce operator.
- Casual taxable person or a non-resident taxable person.
- Manufacturer of certain goods notified by the central government
(i.e.) Ice cream, pan masala & tobacco
11. When will a composition tax payer file his annual return?
- A composition tax payer can file his annual return through FORM GSTR 4 before 30th of April of the following financial year.
12. How can a person paying tax under the normal scheme switch to composition scheme?
- The person who wishes to switch to composition scheme shall electronically file an intimation in Form GST COMP-02 before the commencement of the Financial year for which the option to pay tax under the aforesaid section is exercised and shall furnish the statement in Form GST ITC-03 in accordance with the provisions of sub rule (4) of rule 44 within a period of 60 days from the commencement of the relevant financial year.
13. Can a composition tax payer supply goods to SEZ?
- No, A composition tax payer cannot supply goods to SEZ as it is deemed to be an interstate supply and such persons making interstate supplies are not eligible to opt for composition scheme.
14. What will happen in case the turnover of a composition tax payer exceeds the threshold limit in the midst of a financial year? What will be the tax treatment in such as case?
- The composition scheme shall lapse with effect from the day on which the aggregate turnover during a financial year exceeds the threshold limit (1.5 crore/75 lakhs/50 lakhs) as the case maybe. The taxpayer is required to file an intimation in Form GST CMP-04 within 7 days from the day on which the threshold limit is exceeded. Alternatively, a composite dealer can opt out the scheme voluntarily by filing an intimation in Form GST CMP-04 within 7 days of opting out of the scheme.