Basic Questions about GST Composition Scheme For Small Traders

As the threshold for enrollment for GST is as low as ₹ 20 lakh, most of the small and average sized firms (SMEs) would now come under the GST. Acknowledging, these Organisations may not have the base and resources to comply with the reasonable requirements, Government has a Composition Scheme for small scale traders. It is simply an extension of the current plan under VAT law.

composition scheme vs regular customer
While choosing the Composition Scheme of GST, a taxpayer will be expected to file compiled returns on a quarterly basis, instead of three-month returns (as norms for other businesses).
Let us focus on small problems for this scheme and try to find out the answers:

1. Who is eligible for this plan?

Your annual turnover must be less than ₹ 75 Lakhs. Firms dealing in goods can go for composition scheme. Services providers are not eligible for it. However, Hotel sector business people may also go for this plan.

2. A composition trader needs to keep detailed record??

No, traders with composition scheme do not obligate to keep complete records as in the case of a normal one.

3. Can a Composite merchant get the benefit of Input Tax Credit (ITC)?

Composition Dealer can not avail input ITC of GST paid to their supplier.

4. What is the Tax rates applicable for a Composite trader?

Not more than one percent for the manufacturer, 2.5 percent for hotel sector and 0.5 percent for other suppliers.

composition scheme under gst

5. Composition dealer eligible to give tax invoice to customers?

Composition Dealer can not avail ITC. So he cannot issue a tax invoice as well. A buyer from such dealer will not be qualified to claim input tax on purchased goods.

6. which IT return a composition scheme holder should file?

He needs to file only one IT return i.e. GSTR-4 on a quarterly basis and a yearly return in FORM GSTR-9A.

7. can he get composition tax independently?

Not at all! He can not collect composition tax from his customers.

8. Can a trader involved in interterritorial supplies go for Composition Scheme??

No, This Scheme is prepared only for within state supplies. If a merchant participates in inter-State supplies, he stands ineligible for this plan.

9. Is obligation to pay taxes under GST Reverse Charge covered under the Composition Scheme?

Any tax payable under GST Reverse Charge will not be under the scheme. These taxes will be subjected to be handled as a regular tax payer.

10. Are there some strict penal provisions for defaulters under the plan?

If a taxable person was not eligible for the plan but go for it, he shall be accountable to pay differential tax along with fine and provisions of demand and recovery will apply.

11. What are the requirements for gaining ITC on stock enduring at the time of transition?

To obtain credit on input during the transition from composition to the regular scheme, following conditions are necessary to fulfill:

  • The person was suitable for CENVAT Credit on goods under the former administration, but, couldn’t claim it being under composition scheme.
  • Such goods are for making taxable supplies under GST.
  • Goods are suitable for input tax credit (ITC) under GST regime.
  • The Trader has proper evidence of input tax paid on these goods.
  • Invoices should be there within 12 months from GST date.

12. What are the shift terms if a business transits from Composition Scheme under present regime to General Taxation under GST?

A person enrolled for composition scheme for the current administration will be sanctioned to take credit of input in stock, or in semi-finished/finished goods on the day leading the date from which they choose, as an ordinary tax payer.

13. What is the procedure for gaining input credit while going from regular scheme to Composition?

While shifting from conventional system to composition, the individual will be subject to pay an amount equal to the credit of input tax existed in stock on the day immediately after the date of such shifting. The remainder of input tax credit after payment of this amount, if any lying in the credit ledger shall be a lapse.

14. What if we want to surrender this scheme ??

Yes, you can do it by filling GST CMP-04, and within 30 Days or such option in the form of GST ITC-01 bearing detail of stock inputs to be filed.


Brief Idea About GST Composition Scheme: READ HERE

ready for gst


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