What is the scope and feature of Composition Scheme? Explain New Composition Scheme for services u/s.
What is the scope and feature of Composition Scheme? Explain New Composition Scheme for services u/s.
Ans.
Scope and Features of the Composition Levy
(Section 10 of the CGST Act)
The objective of composition levy under the Act is to simplify procedural compliances, particularly, for the small suppliers. Composition levy of payment of tax is an alternative mode of payment of tax and offered as a choice to the dealers. Inspite of various conditions and restrictions contained in the composition levy, the composition provisions cannot be said to be one imposing an additional burden on dealers who opt for composition.
Section 10 stipulates that a registered person, whose aggregate turnover in the preceding F.Y. does not exceed 1.5 crore, may opt to pay an amount calculated at the prescribed rates during the current F.Y., in lieu of the tax payable by him.
Special Category States under Composition Scheme
While fixing lower limit of aggregate turnover to the extent 75 lakh, GST now recognised following 8 States under this category. Other two special States-Himachal Pradesh and Assam-are now in general category of 1.5 crore limit of turnover.
1. Mizoram,
2. Manipur,
3. Nagaland,
4. Tripura,
5. Arunachal Pradesh,
6. Uttarakhand,
7. Meghalaya and
8. Sikkim.
Any registered person adopting composition option could not provide services, other than restaurant services, but after the amendment in this regard w.e.f. 01.02.2019, such persons may supply of other services also. But the value of such other services shall not be more than 10% of the aggregate turnover in the preceding financial year or 5 lakh (whichever is higher).
New Composition Scheme for Sservices U/s 10 (2a)
A composition scheme for services shall be made available for small suppliers of services (or mixed supplier) with a tax rate of 6% (3% CGST+3% SGST) having an annual turnover in preceding financial year upto 50 lakh.
Government has introduced this scheme for small services providers by adding a new section 10(2A) in the CGST Act, 2017. This scheme has been introduced for those service providers whose turnover is more than the limit of services accepted to remain in Composition Scheme. No specific name is given to this scheme. But may be called, New Scheme.
Eligibility: Person opting this scheme must not:
(a) Engage in making any supply of goods or services which are not leviable to GST.
(b) Engaged in making any inter-State outward supplies of goods or services.
(c) Engaged as E-Commerce Operator liable to collect tax at source.
(d) Casual Taxable Person or a Non-Resident Taxable Person.
(e) A manufacturer of such goods or supplier of such services as may be notified.
Composition Scheme and New Scheme are mutually exclusive schemes out of these two, one can be opted for all of business having same PAN. If supply of services are within the limit of 5 lakh or 10% of aggregate turnover, one should choose Composition Scheme.
Compliance under composition scheme be simplified now as they would need to file one Annual Return but payment of tax on quarterly basis.
These provisions shall be made operational from 1st of April, 2019.
