Latest FAQ on GST Composition Scheme

Latest FAQ on GST Composition Scheme: In this article, we’re going to answer a bunch of common questions about the GST composition scheme. These are the questions that many people have when dealing with GST. By answering these questions clearly and simply, we hope to make it easier for businesses and taxpayers to understand and follow the rules of GST. So, let’s jump right in and tackle these FAQs one by one!

General FAQ on Composition Scheme

  1. What is the Composition Scheme under GST?The Composition Scheme under GST is designed as a simplified tax payment method for small businesses. Instead of dealing with complex GST rules, businesses can pay a fixed amount based on their turnover, offering a shortcut for tax compliance.
  2. Who is eligible for the Composition Scheme?Eligibility for the Composition Scheme is based on the aggregate turnover of the registered person. In most states, the threshold is Rs. 1.5 Crores in the preceding financial year. However, certain states have special exceptions where the turnover limit is reduced to Rs. 75 lakhs.
  3. What are the key criteria for eligibility under the Composition Scheme?The key criterion for eligibility is the aggregate turnover of the registered person, which should not exceed the specified threshold for the respective state or region. Additionally, opting for the Composition Scheme applies to all registrations under the same PAN.
  4. Can service providers opt for the Composition Scheme under GST?Generally, service providers are not eligible for the Composition Scheme, except for those offering specific services like restaurant or catering services. However, a special composition scheme is available for other service providers whose turnover doesn’t exceed Rs. 50 lakhs.
  5. What is aggregate turnover in GST law?Aggregate turnover in GST law refers to the total value of various types of supplies made by a business, including taxable supplies, exempt supplies, nil-rated supplies, export of goods/services, and inter-state supplies to distinct persons under the same PAN number.
  6. How can a business opt for the Composition Scheme under GST?Businesses can opt for the Composition Scheme while applying for GST registration by selecting the option in Form GST REG-01. For those already registered under the normal scheme, they can switch to the Composition Scheme by filing an intimation in Form GST CMP-02.
  7. What are the implications of opting into the Composition Scheme under GST?There are several conditions, restrictions, and compliance requirements to follow after opting for the Composition Scheme. These include fulfilling reverse charge liability obligations, issuing bills of supply instead of tax invoices, not collecting tax from recipients, and filing quarterly returns in Form GSTR-4 and annual returns in Form GSTR-9A.
  8. What are the tax rates under the Composition Scheme for different types of businesses?Tax rates under the Composition Scheme vary based on the type of business. For manufacturers and traders (goods), the CGST rate is 0.5% and the SGST rate is 0.5%, resulting in a total tax rate of 1%. Restaurants not serving alcohol have a total tax rate of 5%, while service providers and manufacturers of certain goods have a total tax rate of 6%.
  9. How does the Composition Scheme benefit small businesses?The Composition Scheme simplifies tax compliance for small businesses by offering a fixed tax payment based on turnover, reducing paperwork, and allowing businesses to focus more on their core operations.
  10. Is the Composition Scheme suitable for all types of businesses?The Composition Scheme has benefits as well as limitations, and businesses need to evaluate their eligibility, turnover, and compliance requirements before opting in. It may not be suitable for businesses engaged in certain activities or dealing with specific goods/services.

Composition Scheme Under GST – Updated 2024

FAQ on GST Composition Scheme Turnover Limit

1. What is the turnover limit for businesses to be eligible for the Composition Scheme under GST?

  • The turnover limit for businesses to qualify for the Composition Scheme under GST is ₹1.5 crore.

2. What does the turnover limit include for businesses opting for the Composition Scheme?

  • The turnover limit includes the aggregate turnover of the business, comprising taxable supplies, exempt supplies, exports, and inter-state supplies, while excluding taxes, inward supplies under reverse charge, etc.

3. Are there different turnover limits based on the type of business or location?

  • Yes, there are different turnover limits based on business types (service providers, manufacturers, traders) and locations (general states, North-Eastern states, Himachal Pradesh, and Uttarakhand).

4. What are the turnover limits for service providers under the Composition Scheme?

  • Newly registered service providers can opt for the Composition Scheme if their turnover does not exceed ₹50 lakhs in the current financial year. Previously registered service providers must not have exceeded ₹50 lakhs in the previous financial year.

5. What are the turnover limits for manufacturers and traders under the Composition Scheme?

  • Manufacturers and traders can opt for the Composition Scheme if their turnover does not exceed ₹1.5 crore in general states and ₹75 lakhs in North-Eastern states, Himachal Pradesh, and Uttarakhand.

6. How has the turnover limit evolved over time?

  • The turnover limit has increased from ₹75 lakhs initially to ₹1.5 crore for general states and from ₹50 lakhs to ₹75 lakhs for special category states like North-Eastern states, Himachal Pradesh, and Uttarakhand.

7. What are the exclusions from the turnover limit calculation for the Composition Scheme?

  • Exclusions include taxes and duties under GST, inward supplies under reverse charge, advances without invoices, non-taxable income, exports, supplies to SEZs, and personal consumption goods.

8. Are e-commerce operators and suppliers of goods eligible for the Composition Scheme?

  • Yes, after specific amendments, suppliers of goods through e-commerce platforms can access Composition Scheme benefits, subject to certain procedures and restrictions outlined by the GST authorities.

9. How can businesses stay updated about turnover limit changes and Composition Scheme updates?

  • Businesses should regularly check official notifications from the GST authorities and consult with tax professionals to ensure compliance and understanding of eligibility criteria.

10. What are the penalties or consequences of non-compliance with turnover limit regulations?

  • Non-compliance may result in penalties or disqualification from the Composition Scheme, leading to higher tax rates and increased compliance burdens. It’s crucial for businesses to adhere to the turnover limits and other GST regulations to avoid such consequences.

GST Composition Scheme Turnover Limit: A Comprehensive Guide

FAQ on Composition Scheme Tax Rates under GST

1. What are the tax rates under the Composition Scheme for manufacturers and traders of goods?

  • Manufacturers and traders under the Composition Scheme pay a total tax rate of 1% (0.5% CGST + 0.5% SGST) on their turnover.

2. What is the tax rate for restaurants not serving alcohol opting for the Composition Scheme?

  • Restaurants not serving alcohol pay a total tax rate of 5% (2.5% CGST + 2.5% SGST) on their turnover under the Composition Scheme.

3. What tax rate applies to service providers under the Composition Scheme?

  • Service providers opting for the Composition Scheme pay a total tax rate of 6% (3% CGST + 3% SGST) on their turnover.

4. Are manufacturers of bricks and building materials eligible for the Composition Scheme, and what tax rate do they pay?

  • Yes, manufacturers of bricks and building materials can opt for the Composition Scheme and pay a total tax rate of 6% (3% CGST + 3% SGST) on their turnover.

5. What are the advantages of being a Composition Dealer under GST?

  • Advantages include simplified compliance, reduced tax burden with fixed lower tax rates, no input tax credit (ITC) but simplified tax calculations, limited liability, and the ability to focus on core business operations.

6. Can businesses opt for the Composition Scheme regardless of their turnover?

  • No, businesses must meet the turnover limit criteria (₹1.5 crore as per the last update) and fulfill specific eligibility requirements to opt for the Composition Scheme under GST.

7. How can businesses verify the current tax rates and eligibility criteria for the Composition Scheme?

  • Businesses should check official notifications from the GST authorities or consult with tax professionals to ensure they have the latest information on tax rates, turnover limits, and eligibility criteria for the Composition Scheme.

8. Is input tax credit available to businesses under the Composition Scheme?

  • No, businesses under the Composition Scheme cannot claim input tax credit (ITC). They pay taxes at fixed rates based on turnover without the ability to offset taxes paid on purchases.

9. Are there any penalties for non-compliance or misuse of the Composition Scheme?

  • Non-compliance or misuse of the Composition Scheme can lead to penalties or disqualification from the scheme. It’s important for businesses to adhere to the rules and regulations of the scheme to avoid such consequences.

10. Can businesses switch between the Composition Scheme and regular GST filing?

  • Businesses can switch between the Composition Scheme and regular GST filing under certain conditions and procedures specified by the GST authorities. It’s advisable to seek guidance from tax experts before making such transitions.

Composition Scheme Tax Rates under GST

Categories GST

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