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Published on:
February 20, 2023
By
Paramita

Highlights of Composition Scheme under GST

Small and medium enterprises (SMEs) and start-ups have always been the backbone of the Indian economy. The implementation of the Goods and Services Tax (GST) has heralded a new era for these businesses. One of the most beneficial schemes under GST for SMEs and start-ups is the Composition Scheme. It is a simple and easy-to-follow tax regime that aims to ease the compliance burden on small businesses. In this article, we will explore the highlights of the Composition Scheme under GST.

What is the Composition Scheme under GST?

The Composition Scheme is a simple and easy-to-follow tax regime that aims to ease the compliance burden on small businesses. Under this scheme, small businesses can pay tax at a fixed rate on their turnover, instead of paying tax at the regular rates. The Composition Scheme is available to businesses whose turnover does not exceed Rs. 1.5 crore in a financial year.

Highlights of the Composition Scheme under GST

Let us now look at some of the key highlights of the Composition Scheme under GST:

1. Lower tax rates

One of the biggest advantages of the Composition Scheme is that it offers lower tax rates compared to the regular GST rates. Small businesses can pay tax at a fixed rate of 1% (for manufacturers and traders) or 5% (for restaurants and service providers) on their turnover, instead of paying tax at the regular rates.

2. Simplified compliance

Small businesses that opt for the Composition Scheme have to file only one quarterly return instead of three monthly returns. This makes compliance much simpler and easier for small businesses, as they do not have to spend a lot of time and resources on tax compliance.

3. No input tax credit

Businesses that opt for the Composition Scheme are not eligible for input tax credit. This means that they cannot claim credit for the tax paid on their purchases. However, this is not a big disadvantage for small businesses, as they usually do not have a lot of input tax credit to claim.

4. Limited tax liability

Small businesses that opt for the Composition Scheme have a limited tax liability. This means that they do not have to pay tax on their entire turnover. They only have to pay tax on the turnover that is covered under the Composition Scheme.

5. No requirement for detailed invoices

Small businesses that opt for the Composition Scheme do not have to issue detailed invoices. They can issue simple invoices that contain the name, address, and GSTIN of the supplier, along with the date, description, and value of the goods or services supplied.

Conclusion

The Composition Scheme under GST is a simple and easy-to-follow tax regime that aims to ease the compliance burden on small businesses. It offers lower tax rates, simplified compliance, limited tax liability, and no requirement for detailed invoices. Small businesses that opt for the Composition Scheme can save a lot of time and resources on tax compliance, and focus on growing their business instead.

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Updated on:
March 16, 2024