KEY TAKEAWAYS OF GST COMPOSITION SCHEME
What’s the GST COMPOSITION SCHEME?
The GST Composition Scheme is designed for small taxpayers to reduce the burden of tax enforcement. Small taxpayers do not need to file monthly GST returns, and they need to pay marginal GST at a fixed turnover rate.
Any company with an annual turnover of up to 1.5 Crore can opt for GST registration under the composition scheme.
Who cannot opt for the scheme of composition?
· Manufacturer of ice cream, pan masala, or tobacco
· Businesses that supply goods through an e-commerce operator
· Relief of taxpayers providing exempt supplies
· Supplier of services other than service providers for restaurants
· Casual taxable person or non-resident taxable person
GST composition scheme registrations:
The Composition System is a simple and easy scheme for taxpayers under the GST. Small taxpayers can get rid of tiring GST required documents and pay GST at a fixed turnover rate.
Any taxpayer whose revenue is less than Rs. 1.5 crore* can opt for this scheme.*Central Board of Indirect Taxes and Customs notified the increase to the limit from Rs 1.0 Crore to Rs. 1.5 Crores.
In order to benefit from the benefits of this program, taxpayers must register on a voluntary basis. If as the case may be the taxpayer’s yearly income turnover reaches 75 lakh, it will be moved to the normal scheme. Taxpayers who are already part of the composition of GST must register on a voluntary basis under this scheme.
The GST Rate applicable for Gst Composition Scheme
The tax rate or recommended for different categories of Gst Composition Scheme registered persons has been defined below:
Format of GST Invoice for GST Composition Scheme
The GST Composite Dealer in GST shall not issue a tax invoice and shall only issue a Bill of supply containing the following details:
|a)||Name, GSTIN, and address of the supplier|
|b)||a serial number not exceeding 16 characters, in one or various series, containing alphabets or numerals or special characters|
|c)||date of its issue|
|d)||Name, address, and GST Tax Identification Number or Unique Identity Number, if registered, of the recipient|
|e)||HSN Code for goods or services|
|f)||Particular of goods or services or both|
|g)||Value of supply of goods or services or both after considering discount or abatement, if any;|
|h)||a signature or digital signature of the supplier or his authorized representative|
COMPARISON BETWEEN. COMPOSITION SCHEME VS REGULAR SCHEME
|Composition Scheme||Regular Scheme|
|Filling of GST Return||Composition taxpayers needed to file quarterly return.||Ordinary taxpayers needed to file the monthly return.|
|Issue of Tax Invoice||Composition taxpayers can not issue tax invoices to their clients.||Normal taxpayers can issue a tax invoice to their clients.|
|Applicable Tax Rate||Composition taxpayers need to pay nominal GST at a fixed rate of turnover, which is normally 1-5%.||The tax rate for regular taxpayers’ goods and services, which is from 0-28%.|
|Input Credit||Composition taxpayers cannot avail of ITC benefits.||Normal taxpayers can avail of ITC benefits.|
|Regular Compliance||Relaxed Compliance in order to safeguard small businessmen.||Normal compliance required.|
The validity of the levy on composition
It focuses on the fulfillment of the conditions discussed above but the person qualified for the scheme can also opt-out of the scheme by filing an application. In the event that the Proper Officer has grounds to suspect that the taxpayer is not eligible for the scheme or has contravened any of the Rules or Actions, the Proper Officer may issue a notice of cause followed by an order rejecting the scheme.
GST Compliance Regulations of the Composition Scheme
Composition Scheme Rules under the GST specify for the submission of various forms intended for the respective purposes, followed by a deadline for the submission of the following forms:
|Form Required||The objective of filling FORM||Timeline of compliance|
|GST CMP-01||To opt into the scheme by provisional GST Registration holder||before the appointed date or within thirty days of the said date|
|GST CMP-02||Intimation of willingness to opt into the scheme for GST registered normal taxpayers||Prior to the commencement of FY|
|GST CMP-03||Details of stock and inward supplies from registered and unregistered persons||Required to comply within ninety days of the exercise of the option|
|GST CMP-04||Intimation of withdrawal from the scheme||Required to comply within seven days of the occurrence of the event|
|GST CMP-05||Show cause notice on contravention of Rules or Act by a proper officer||On any contravention|
|GST CMP-06||Needed to reply to show cause notice||Required to comply within fifteen days|
|GST CMP-07||Issue of Order||Required to comply within thirty days|
|GST REG-01||Required for Registration under GST Composition scheme||before the appointed date|
|GST ITC-01||Details of semi-finished, inputs in stocks & finished goods||thirty days of withdrawing option|
|GST ITC-03||Needed for intimation of ITC available||Required to comply within Sixty days of commencement of the FY.|
Prohibition & Conditions on Composition Lev scheme
The person opting for the scheme must not be a casual taxable person or a non-resident taxable person. The goods kept by him in stock on the appointed date shall not be purchased from a place outside his state. Therefore the products should not be listed as:
- Branch outside the State
- Agents or principals located outside the territory of the State
- Purchase of the Interstate
- Goods Imported
Where taxpayers deal with unregistered individuals, the tax must be paid or no stock must be kept.
It is not a manufacturer of products that may be notified by the Government during the preceding financial year.
Compulsory show of invoices with the words “composure of taxable persons not liable for tax on supplies”
Compulsory display of the words “Composition Taxable Citizen” on each notice and sign displayed at a prominent location
The advantage under GST Composition Scheme
- High Liquidity
- Less Compliance
- Reduced tax liability
Prohibition of GST Composition Scheme
- No Inter-state business
- Pay tax from own pocket
- No Credit of Input Tax
Books of Accounts & Records to be maintained by dealer :
- Registered persons who have opted for a composition scheme are not expected to maintain an inventory of products received and supplied by him.
- It is also not bound to maintain and preserve an account containing information of tax payable, tax collected, ITC, etc.
- Most other regulations relating to accounts and records shall extend to individuals who have opted for a composition scheme.
- In order to file GSTR-4, the registered individual should retain and maintain fair details of the outward supply and inward supply at the rate of tax. It should also be prudent to hold specifics of the invoice for inward supplies and the supplier wise.
If the taxable person is not eligible for the scheme of the composition of the GST, the tax authorities may impose a penalty equal to the amount of tax on the taxable person along with his tax liability.
Be patient while using this scheme and paying taxes. The penalty shall be levied in compliance with the provisions of Section 73 or 74 where a person represents inaccurate information under the composition scheme.
- What exactly is Form GSTR 4 Annual Return:-Annual GSTR 4 Annual Return for each Financial Year will be submitted by all Composition Taxpayers (w.e.f 01 April 2019).
- For those taxpayers who have opted for GST Composition Scheme in the new indirect tax regime, the GSTR-4 form is an annual return.
- Under the GST composition scheme, taxpayers will be required to file one return for each fiscal year only. The taxpayers will also be required to file CMP-08 for the payment in each qtr of the year. The expected date for each CMP-08 filing is the 18th of every succeeding quarter
Who is supposed to file Form GSTR-4 Annual Return:
All Composition Dealers who have preferred composition scheme for some time, must file GSTR 4 on a yearly basis from 01.04.2019 on.
- Both registration composite taxpayers are required to file a tax return. A taxpayer who opts for a Composition Scheme is required to file GSTR-4, except for –Non-resident taxable citizen
Taxpayers who are eligible to collect TCS
Distributors of Input Operation
Taxpayers liable to deduct TDS
Composing taxable citizen
OIDAR Suppliers (Online Information and Database Access or Retrieval)
- May Nil GSTR 4 Annual report filed: you can register the report of Zero for the financial year if you have:
- NOT made any outward supply
- NOT received any goods/services
- Have NO other liability to report
- Have filed all Form CMP-08 as Nil
- Due date of filing GSTR 4 & GST CMP-08 Payment Form: It must be filed by 31/10/2020 for FY 2019-20 and the due date for GST CMP 08 Due Date for FY 2020-21
|Quarterly Period||Timeline Dates|
|1st Quarter – April to June 2020||18th July 2020|
|2nd Quarter – July to September 2020||18th October 2020|
|3rd Quarter – October to December 2020||18th January 2021|
|4th Quarter – January to March 2021||18th April 2021|
- Required to file Form GSTR-4 Annual return: Click on Services-Return-Annual Return-Select FY 2019-20-Search-GSTR 4- File Return to login into your dashboard.
Process step to be taken care of during the filling of GSTR 4:
- The File key is only activated if:
- No additional cash is required for liabilities
- You tapped on the checkbox for the declaration
- You picked the approved signatory information from the drop-down list
- The surplus balance paid by GST CMP-08, which is included in the derogatory declaration of responsibility, will also be added to liabilities if any.
- If the available balance in the electronic cash ledger is less than the amount needed to cover the liabilities, you can directly generate the voucher by clicking on the Build CHALLAN button.
- Taxes and late payments are drawn up automatically in Table-8, but interest is the feedback of the customer. Liabilities can only be discharged by an automated cash ledger.
- The inward supply data (from Table 4B, 4C, and 4D for each tax rate) will be auto-drawn in Table-6 only after the Taxpayer has pressed the ‘Continue to register’ button. The balance before that is shown as ‘0’ (zero)
- After entering outward supply information in Table-6 and pressing the “Proceed to register” button, RCM-based liability is auto-populated from the details provided in Table 4B, 4C, and 4D. Table-6 indicates then the gross tax obligation
- The taxpayer has to enter the descriptions of the outward supplies in Table-6 (Row 12-16) of GSTR-4 manually.
- Overview of self-assessed liability is auto-populated on the basis of filed Form CMP-08 in Table-5 of the GSTR-4 Annual Return & is uneditable.
- The GST amount in Table-4 of GSTR-4 is basically auto calculation made on the input of the values fed in Taxable Value and tax rate fields. However, the GST amount is editable in the table. The CESS shall be paid by the taxpayer.
- The cumulative revenue is expected to be entered over the last year and if there is no sale or revenue in the last year of the company or if it is not registered, it could be zero.
- The annual GSTR 4 return submission will be triggered after the taxpayer has completed the filing of all quarters of the CMP-08 for that fiscal year.
A few Important points to consider before filing GSTR 4:
- Form GSTR 4 can be filed only if, all applicable quarterly statements in Form CMP 08 of that financial year, have been filed.
- Form GSTR-4 Annual Return, once filed, can’t be revised
- After successfully filing, ARN will be generated and intimated through email and SMS
- Currently, only online filing has been enabled on the portal. Shortly, an offline tool to file Form GSTR-4 Annual Return will also be made available.
New updates in Form GSTR 4 –
Current features of GSTR 4 Return Form
- The GSTR 4 annual return due date has been extended again until 31 October 2020 for the year 2019-20 Read more
- Let us understand how to create use offline techniques to plan Form GSTR 4 Annual Composition Taxpayer Return. The GST platform has created an offline excel tool for all tax-paying citizens to help them obtain their GSTR 4 annual return form
- GSTR 4 Returns shall be filed on an annual basis for compounding taxable individuals. The last date of filing of the GSTR-4 (CMP-08) payment form is the 18th of the month following the section. GSTR 4 (CMP-08) returns may be filed on 18 April, 18 July, 18 October, and 18 January, and so on.
- GSTR – 4 The form is submitted by all taxpayers enrolled under the composition scheme.
- Business enterprises listed under the composition system would be expected to pay tax at fixed rates on a regular basis without the use of an input tax credit facility.
- The taxpayer would be allowed to show the overall amount of products purchased over a given time and the tax collected at the composition rate
Annual Return Form GST-4 Available on the GST Server.
Currently, the GSTN has agreed to encourage residents, assessors, and companies to file GSTR 4 on an annual basis. This has been achieved because of the community’s demand.
The form is also available on the site, which further eased the assessment and the taxpayers in identifying and submitting the form as per their approval.
11. Recent Council GST Meeting with regard to for Composition Traders
- GSTR 4 return is required to be submitted on a quarterly basis instead of on a quarterly basis with the tax paid on a quarterly basis.
- The GST Council expanded the annual turnover cap to 1.50 Crores, effective from 1 April 2019.
- GST threshold of 6% relevant to the Composition Scheme for service providers and sales of up to 50 lakh per year
- Note: The aforementioned changes shall be taken following the official notification of the govt.
12. Does the GSTR 4 be revised?
After filing on the GSTN Site, GSTR-4 can not be updated.
13. Is there a penalty for the late filing of GSTR 4?
A delayed fee of Rs. 200 per day shall be charged if the GSTR-4 is not filed within the due date. The cumulative late fee can not, nevertheless, exceed Rs. 5,000.
14. The basic term normally used in GSTR 4
- SAC – Services Accounting Code
- B2C – From registered person to unregistered person
- UQC – Unit Quantity Code
- POS – Place of Supply of Goods and Services
- GSTIN – Goods and Services Taxpayer Identification Number
- UIN – Unique Identification Number
- HSN – Harmonised System of Nomenclature
- B2B – From one registered person to another registered person
Going to conclude
Any person who opts for the Gst Composition Scheme shall be deemed to have opted for all places of business having the same registered PAN. Therefore you cannot want any of the places of business to be registered under the scheme.