Advisory to composition taxpayers under GST

The GST (Goods and Services Tax) regime was introduced on 1st July 2017 and since then, it has undergone several amendments to be more effective and convenient for taxpayers. One of the significant provisions of GST is the Composition Scheme, which is an option available for small taxpayers to pay tax at a fixed rate based on their turnover. This scheme was introduced with the objective of reducing the compliance burden on small businesses by simplifying the tax procedures and reducing the tax liability.

The Composition Scheme is available to taxpayers whose aggregate annual turnover does not exceed Rs. 1.5 crores. The taxpayers opting for the Composition Scheme are required to pay GST at a fixed rate based on the nature of their business. The rate of tax for manufacturers and traders is 1%, while for restaurants, it is 5%.

However, there are certain conditions that need to be fulfilled by the taxpayers to avail the benefits of the Composition Scheme:

Only intra-state supply of goods is allowed
No input tax credit is available
The taxpayers cannot supply exempted goods
The taxpayers cannot supply goods through an e-commerce operator
The taxpayers cannot be engaged in the inter-state supply of goods

As the Composition Scheme has several restrictions, it is essential for the taxpayers to understand the provisions and comply with them. Here are some advisory points that composition taxpayers should keep in mind:

1. Maintenance of Records and Accounts

Composition taxpayers are not required to maintain detailed records of their purchases and sales, as they cannot claim input tax credit. However, they are required to maintain a register of their inward and outward supplies, along with the details of tax paid. The taxpayers should maintain proper records and keep them updated to avoid any discrepancies and ensure smooth compliance with GST.

2. Payment of Tax

The taxpayers opting for the Composition Scheme are required to pay tax on a quarterly basis. The due dates for payment of tax are as follows:

April to June - 18th July
July to September - 18th October
October to December - 18th January
January to March - 18th April

The taxpayers should ensure timely payment of tax to avoid any penalty and interest.

3. Issue of Bill of Supply

As composition taxpayers cannot issue a tax invoice, they are required to issue a Bill of Supply for every supply made. The Bill of Supply should contain the name, address, and GSTIN of the supplier, along with the description of goods supplied, the total value of goods supplied, and the tax payable.

4. Registration under GST

The taxpayers opting for the Composition Scheme are not required to register under GST if their aggregate turnover does not exceed Rs. 20 lakhs. However, if the taxpayers are engaged in supplying goods in more than one state or if they are involved in the supply of goods through an e-commerce operator, they are required to register under GST, irrespective of their turnover. The taxpayers should ensure timely registration under GST to avoid any penalty.

5. Filing of Returns

The taxpayers opting for the Composition Scheme are required to file a quarterly return in Form GSTR-4 by the 18th of the month following the end of the quarter. The taxpayers should ensure timely filing of returns to avoid any penalty and interest.

Conclusion:

The Composition Scheme is a beneficial scheme for small taxpayers, as it reduces the compliance burden and simplifies the tax procedures. However, the taxpayers should ensure timely compliance with the provisions of the scheme and maintain proper records to avoid any discrepancies. The advisory points mentioned above can help the composition taxpayers to comply with the provisions of GST and avoid any penalties and interests.