Latest update of GST Composition Scheme
CBIC has issued Notification No. 59/2020-Central Tax and extended due date for FY 2019-20 is 31st August 2020 which earlier was 15th July 2020.
GSTR-4 is available for filing for FY 2019-20 from 21st July 2020.
Overview of the GST Composition Scheme?
The Composition levy scheme under the GST Act is a very simple, hassle-free compliance scheme for small taxpayers. It is a voluntary and optional scheme.
Small taxpayers can get rid of compliance on a monthly basis and maintenance of stock and HSN details and pay tax on a quarterly basis at a certain percentage of turnover for the quarter.
Turnover limit for Composition Scheme under GST
|North Eastern States||Rs.75 Lakhs|
|Uttarakhand and Jharkhand||Rs.1 Crore|
|All Other States||Rs.1.5 Crore|
|Service Providers||Rs.50 Lakhs|
GST rate for composition scheme
|Sr. No.||Category of Registered Person||Rate of Tax|
|1||Manufacturers other than the manufacturer of notified goods||1% of Aggregate Turnover (0.5% CGST0.5% SGST)|
|2||Traders||1%of Taxable Turnover|
|3||Restaurant Services (Not serving alcohol)||5% of Aggregate Turnover (2.5% CGST plus 2.5% SGST)|
|4||Service Providers (New Composition Scheme from FY 2019-20)||6% of Aggregate Turnover (3% CGST plus 3% SGST)|
How to calculate Service Limit for Composition Dealer?
A composition dealer can also provide/supply the services up to the extent of the 10% of the aggregate turnover of the previous year or 5 lakhs, whichever is higher.
Who cannot opt for the Composition Scheme?
- A registered taxable person whose aggregate turnover has crossed the threshold limit.
- Manufacturers of the Ice-cream, Pan-masala, or Tobacco.
- A registered person making the ‘’Inter-State supply’’.
- A casual taxable person [CTP] or the Non-Resident taxable person.
- A registered taxable person who supplies the goods through an e-commerce operator.
What are the disadvantages of the GST Composition Scheme?
- A composition dealer can only supply goods intra-state and not the inter-state but can purchase the goods inter-state for selling it in his state.
- A registered taxpayer has to issue the Bill of Supply in the place of tax invoice and composition dealer cannot charge GST on invoice and GST is to be at a certain percentage of turnover from the pocket of a composition dealer. GST Composition Dealer is required to mention on Invoice “Composition taxable person, not eligible to collect tax on supplies”
- GST Composition Dealer is also not eligible to take the input tax credit [ITC].
- If the dealer is registered in a composition scheme and wants to get registered/switch in the normal scheme, he can do that in the same financial year but from the normal scheme, he cannot register/switch in composition in the same financial year but in the next financial year.
- The dealer has to also mention the words ‘Composition Taxable Person’ on every bill of supply and signboard.
- GST Composition dealer is required to make the following payments from his pocket:-
- GST on supplies made by the supplier.
- Tax to be paid on reverse charge.
- Goods purchased from the unregistered supplier. (Notified categories of goods and services only for real estate)
Compliance timeline for Composition Dealer
- Until FY 2018-19, composition dealers were required to file returns every quarter in GSTR-4 by the 18th of the month after the end of the quarter.
- From FY 2019-20, composition dealers are required to file GSTR-4 once in a year by the 30th of April, following a financial year. Composition dealers are required to make quarterly payments using the CMP-08 Form which is challan cum statement. (For FY 2019-20 – currently extended till 31st August 2020.)
- Annual return in GSTR-9A has to be filed by 31st December of the next financial year.
Interest on Late Payment for Composition Dealer
Interest is required to be paid if the payment is not made before the due date for making payment using CMP-08. The Interest rate applicable to such an amount is 18% per annum and calculation to be made for delay in days.
Late Fee and Penalty for Composition Dealer
Late fees will be charged if the dealer fails to file GSTR-4 before the due date of filing, then he has to pay a late fee of Rs.50/day i.e.Rs.25 each for CGST & SGST, In case the return is a nil return the penalty will be Rs.20/day i.e.Rs.10 each for CGST & SGST but the maximum penalty is Rs.10000(Rs.5000/- of each CGST and SGST).
Steps to file the GSTR-4
- GSTR-4 offline tool should be downloaded and uploaded.
- In the GSTR-4 offline tool, details should be entered.
- Validating details of the form.
- Creating the JSON file & the same need to be uploaded on portal GSTIN.
- The file of GSTR-4 will be downloaded & open the same.
- Filing of GSTR-4 and submission of it has to be done.
- FAQs issued by CBIC – Click here
- CBIC summary on GST Composition Scheme – Click here
- Service Composition Scheme by Notification no. 2/2019- Central Tax – Click here