Composition Scheme is a scheme under GST for taxpayers. Small taxpayers can get rid of the long and tedious GST formalities and can pay GST at a fixed rate of turnover. This scheme can only be used by any taxpayer with a turnover of less than Rs. 1 crore.
Who can use this scheme?
A taxpayer with a turnover of less than Rs 1 crore can make use of the composition scheme. For North-Eastern states and Himachal Pradesh, the limit is Rs 75 lakh.
Turnover of businesses registered with the same PAN should be considered.
A composition dealer can also supply services to ten percent of turnover, or Rs 5 lakhs, the highest amount from both.
If you want to avail the GST composition scheme, the following conditions must be fulfilled:
- A dealer opting for composition scheme cannot claim the Input Tax Credit.
- GST exempted goods cannot be supplied by the dealer.
- The taxpayer has to pay taxes at normal rates for transactions under the Reverse Charge Mechanism.
- If a taxable person has different businesses like textile, electronic accessories, groceries, etc. under the same PAN, the person must register all such businesses under the scheme collectively or will have to opt out of the scheme.
- The taxpayer has to mention ‘composition taxable person’ on every notice or signboard displayed at the place of business, and on every bill of supply issued.
Benefits of the GST the composition scheme:
- Lesser Compliance-The composite taxpayers need to provide only their total sales instead of giving a bill wise summary and are required to pay a fixed percentage of their sales. This would allow the small business owners to focus on their business and would save them a lot of time and effort.
- Limited tax liability-The tax rate for the taxpayer is nominal and minimal if they opt for the composition scheme.
- High liquidity as taxes is at a lower rate.
- Equal opportunity-This scheme would give a small business owner the opportunity to expand the business into local as well as other markets by offering them competitive pricing.
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