Composition scheme under Goods and Services Tax (GST) is basically for small businesses belonging to the unorganized sector with an aggregated turnover of less than Rs 1.5 crore. According to the 32nd GST Council Meeting, a new composition scheme has been together.
The composition scheme is meant for those suppliers who are either providing independent services or a combination of both goods or services and has a turnover of up to Rs 50 lakhs in the preceding financial year. The tax rate for this scheme is 6% (3% CGST+ 3% SGST).
Any businesses whose turnover is below Rs 1 Crore can opt for composition scheme. In case of taxpayer belonging to North-Eastern states and Himachal Pradesh, the limit is now Rs 75 lakh.s
Some of the important features of composition scheme:-
Composition Rate for Different Type Of Businesses
The composition rate for a different type of businesses are as follows: -
The conditions for opting for composition scheme under GST are as follows:
Following class of registered persons would not be entitled to opt for composition levy in lieu of tax payable by them:
Following goods which are not leviable to tax under the GST Act are as follows: -
Exempt supplies are the goods or services sold by the companies free from Goods and Services Tax (GST). No GST will be applied to these goods and services.
Hence taxpayer supplying such goods will not be eligible for composition scheme under GST.
Manufacturer of ice-cream, pan masala or tobacco products will not be eligible for composition scheme under GST.
Services such as restaurant-related where food is served directly to the customer’s table are not eligible under GST.
If the tax authorities find that a business or company is wrongfully registered or not eligible, they have a right to disqualify the business from the benefits of the composition scheme.
In a certain scenario, they might also demand a penalty that may go up to the amount equal to the tax amount owed to the government.
If a business is involved in the late filing of GSTR-4; the business owner or the company director will be charged Rs 100 per day up to the maximum amount of Rs 5000/-.