GST: Option To Pay Tax Under Composition Scheme

GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services in India. The government has introduced the Composition Scheme to benefit small and medium businesses. Under this scheme, businesses with an annual turnover of less than Rs. 1.5 crore can pay tax at a fixed rate, without having to maintain detailed records and filing regular GST returns.

The Composition Scheme is an optional scheme, and businesses can opt for it voluntarily. In this article, we will discuss the eligibility criteria, benefits, limitations, and the process to apply for the Composition Scheme.

Eligibility Criteria for the Composition Scheme

Businesses that meet the following criteria are eligible to apply for the Composition Scheme:

1. The business should be registered under GST

2. The annual turnover of the business should be less than Rs. 1.5 crore

3. The business should not be engaged in the supply of services other than those that are specifically exempted from GST

4. The business should not be engaged in inter-state supplies

5. The business should not be engaged in the supply of goods through e-commerce platforms

Benefits of the Composition Scheme

There are several benefits of the Composition Scheme for small and medium businesses:

1. Reduced Compliance Burden -

Businesses under the Composition Scheme are not required to maintain detailed records or file regular GST returns. They are only required to file a quarterly return.

2. Lower Tax Liability -

Businesses under the Composition Scheme are required to pay tax at a fixed rate, which is lower than the regular GST rate.

3. Increased Cash Flow -

Businesses under the Composition Scheme are not eligible for Input Tax Credit (ITC), but they can still save money as they need to pay tax at a fixed rate, which is lower than the regular GST rate.

4. Attractive to Customers -

Businesses under the Composition Scheme can offer products at a lower price, as they are not required to charge GST on their products.

Limitations of the Composition Scheme

There are some limitations of the Composition Scheme that businesses should keep in mind:

No Input Tax Credit (ITC) -

Businesses under the Composition Scheme are not eligible for Input Tax Credit (ITC). This means they cannot claim a credit for the tax paid on their purchases.

Restrictions on Inter-state Supplies -

Businesses under the Composition Scheme are not allowed to make inter-state supplies. They can only make intra-state supplies.

Restrictions on Certain Goods -

Businesses under the Composition Scheme are not allowed to supply certain goods, such as tobacco and its products, pan masala, aerated water, and alcoholic liquor for human consumption.

Process to Apply for the Composition Scheme

The process to apply for the Composition Scheme is simple:

1. Log in to the GST portal using your credentials

2. Select the ‘Application to opt for the Composition Scheme’ option under the ‘Services’ tab

3. Fill in the required details in the application form

4. Submit the application form

Once the application is submitted, it will be verified by the GST department. If the application is approved, the business will be registered under the Composition Scheme.

Conclusion

The Composition Scheme is a beneficial scheme for small and medium businesses, as it reduces their compliance burden and tax liability. However, businesses should carefully consider the limitations of the scheme before opting for it. If you are eligible for the Composition Scheme, we recommend that you take advantage of it to save time and money.