Composition scheme is to help the small taxpayer by reducing the GST compliance burden. A composition scheme holder needs to maintain lesser records. Further, they have to file GST Return on a quarterly basis rather than monthly basis.
Previously, the composition was exclusively applicable to the supplier of the goods. But the 32nd GST Council Meeting has decided that the service provider can also opt for composition scheme.
Any taxpayer whose annual turnover is less than or equal to 50 Lakhs INR has an option to opt for a service provider.
The method of registration into composition scheme by a service provider is the same as that of existing composition taxpayer. But, the service provider opting for composition levy shall check S.No.5 (iii) in CMP-02. This column states that the service provider is opting as any other supplier eligible for composition levy. Apart from this rest of the information shall be furnished similarly to any other composition dealer.
Wide Notification 97/2019 has extended the time period for opting into composition scheme for a service provider. According to this circular, the time limit has been extended to 30th April 2019. To register under composition levy you need furnish CMP-02 Form.
Here are some major advantages that you can enjoy as a composition scheme holder:
Here are the pre-requisite for opting composition scheme:
The applicable GST rate for Composition Service Provider is 6%
However, this 6% GST Rate is bifurcated into two i.e. 3% CGST and 3% SGST or 6% IGST.
The taxpayer has to furnish the GSTR-4 on a quarterly basis rather than monthly basis. Furthermore, the taxpayer needs to file GSTR 9A annually.
Let us understand the comparison between the Composition Scheme levy and Normal levy with the help of an illustration:
S. No | Particulars | Composition Taxpayer (GST Rate – 6%) | Normal Taxpayer (GST Rate – 18%) |
---|---|---|---|
1 | Sales value | 2,36,000 | 2,36,000 |
2 | Sales value exclusive of taxes | 2,36,000 | 2,00,000 |
3 | Output GST | 14160 | 36000 |
4 | Purchases | 80000 | 80000 |
5 | Input GST @ 18% | 14400 | 14400 |
6 | Total purchase invoice value (6 = 4 + 5) | 94400 | 94400 |
7 | Net GST liability (7 = 3 – 5 Normal) | 14160 | 21600 |
8 | Gross Profit (8 = 1 – {6+7}) | 1,27,440 | 1,20,000 |