know the Benefits: How small businesses can use GST composition scheme

In the intricate web of GST regulations, the Composition Scheme emerges as a beacon of simplicity and convenience, particularly for small businesses. Tailored for taxpayers with a turnover of less than Rs. 1.5 crore*, this scheme offers an escape from the complexities of regular GST formalities by allowing businesses to pay taxes at a fixed rate based on their turnover.

Understanding the Composition Scheme

Eligibility Criteria

Any taxpayer with a turnover below Rs. 1.5 crore* can opt for the Composition Scheme. For businesses in North-Eastern states and Himachal Pradesh, the threshold is Rs. 75* lakh. The CGST (Amendment) Act, 2018, allows composition dealers to provide services up to ten percent of turnover or Rs. 5 lakhs, whichever is higher, effective from February 1, 2019. The GST Council, in its 32nd meeting on January 10, 2019, proposed a potential increase in this limit for service providers*.

Recent Updates

1. February 6, 2023: Composition taxable persons can declare their intention to opt into the scheme for FY 2023-24 by submitting Form CMP-02 on the GST portal until March 31, 2023.
2. February 1, 2023: The CGST Act has been amended, enabling businesses supplying goods through an e-commerce operator to opt for the composition scheme. Note that this amendment is yet to be notified by CBIC.
3. July 5, 2022: Due dates for GSTR-4 for FY 2021-22 and CMP-08 for April-June 2022 are extended with a late fee waiver.

Conditions for Availing of Composition Scheme

To opt for the Composition Scheme, businesses must meet specific conditions:

• No Input Tax Credit can be claimed.
• Goods not taxable under GST, such as alcohol, cannot be supplied.
• Tax must be paid at normal rates for transactions under the Reverse Charge Mechanism.
• If a taxable person has different business segments under the same PAN, they must register all under the scheme collectively or opt out.
• The words ‘composition taxable person’ must be prominently displayed on notices, signboards, and bills of supply.

How to Opt for the Composition Scheme

To embrace the Composition Scheme, taxpayers need to file GST CMP-02 on the GST Portal. This intimation should be submitted at the beginning of each financial year.

Invoicing for Composition Dealers

Composition dealers cannot issue tax invoices; instead, they must provide a Bill of Supply, indicating “composition taxable person, not eligible to collect tax on supplies.”

FAQs: (Frequently asked Questions)

1. Who can opt for the Composition Scheme?
   A taxpayer with a turnover below Rs. 1.5 crore* (Rs. 75* lakh for specific states) can opt for the scheme, subject to certain conditions.

2. Who cannot opt for the Composition Scheme?
   Manufacturers of ice cream, pan masala, or tobacco, those making inter-state supplies, and casual/non-resident taxable persons are ineligible.

3. What are the conditions for availing the Composition Scheme?
   Conditions include the inability to claim Input Tax Credit, restrictions on supplying non-GST taxable goods, and prominently displaying ‘composition taxable person’ on notices and bills.

4. How can a taxpayer opt for the Composition Scheme?
   Taxpayers can opt for the scheme by filing GST CMP-02 on the GST Portal at the beginning of each financial year.

5. How should a Composition Dealer raise a bill?
   Composition dealers issue a Bill of Supply and cannot charge tax from customers. The bill must include the phrase “composition taxable person, not eligible to collect tax on supplies.”

6. Are service providers eligible for the Composition Scheme?
   Yes, service providers can avail the Composition Scheme, with certain limitations and thresholds set by the CGST (Amendment) Act, 2018.

7. What is the recent amendment related to e-commerce operators and the Composition Scheme?
   The recent amendment to the CGST Act allows businesses supplying goods through e-commerce operators to opt for the Composition Scheme, although it is yet to be notified by CBIC.

8. Is there any relief for late filing of GSTR-4 and CMP-08?
   Yes, there have been extensions and late fee waivers for the filing of GSTR-4 and CMP-08, as communicated through various notifications.

9. What is the deadline for declaring intent to opt into the Composition Scheme for FY 2023-24?
   Taxable persons interested in the Composition Scheme for FY 2023-24 must submit Form CMP-02 on the GST portal by March 31, 2023.

10. Can a Composition Dealer supply services?
    Yes, a composition dealer can supply services up to ten percent of turnover or Rs. 5 lakhs, whichever is higher, as per the CGST (Amendment) Act, 2018.

Embracing the GST Composition Scheme can be a game-changer for small businesses, simplifying tax procedures and fostering ease of compliance. Stay updated with the latest amendments and leverage the benefits offered by this scheme tailored for the growth of small enterprises. Taazi News 24 has extended its presence to WhatsApp. Tap here to join and receive the latest updates on Taazi News 24.

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