Latest FAQ on GST Composition Scheme

Newest FAQ on GST Composition Scheme: In this article, we will answer some common questions about the GST composition scheme. These are the questions most people have when dealing with GST composition scheme. By answering them in clear and simple terms, we hope to make it easier for businesses and taxpayers alike to understand and comply with the rules of GST. So without further ado, let us get right into these FAQs one by one!

Frequently Asked Questions About Composition Scheme

1) What is the Composition Scheme under GST?

The Composition Scheme under GST is a simplified method of tax payment for small businesses. Instead of grappling with complex GST rules, they can pay a fixed sum based on their turnover which acts as a shortcut for tax compliance.

2) Who is eligible for the Composition Scheme?

Eligibility for composition scheme depends upon the aggregate turnover of the registered persons. In most states, the threshold limit is Rs 1.5 Crores in the preceding financial year However some states have special exceptions where the turnover limit gets reduced to Rs 75 lakhs.

3) hat are the key criteria for eligibility under the Composition Scheme?

The key criterion of eligibility is that the aggregate turnover should not exceed the specified threshold limit for the respective state or region within which such person is registered as a supplier; Secondly, all registrations carried out through a single PAN shall be treated as one registration only if opted for composition scheme otherwise each registration shall be considered separately.

4) Can service providers opt for the Composition Scheme under GST?

Normally service providers are not eligible except those providing certain services like restaurant or catering services but there also exists another composition scheme applicable on other service providers having turnover up to Rs. 50 Lakh.

5) What does “Aggregate Turnover” mean in GST Law?

“Aggregate Turnover” means the value of all taxable supplies (excluding the central tax, State/Union Territory Tax and integrated tax) made by any person whether on his own account or on behalf of the principal’s business along with value of zero-rated supply & inter-State supply made under same PAN during one financial year.

6) How can a business opt for a Composition Scheme under GST?

A person can choose a composition scheme at the time of applying for new registration in GST by selecting the appropriate option in FORM GST REG-01. If someone is already registered under normal scheme, then he may opt out of it and shift to this scheme by filing intimation in FORM GST CMP-02.

7) What are the implications of opting into Composition Scheme under GST?

There are certain conditions, restrictions and compliance requirements which need to be followed once an entity has opted for composition levy like payment through reverse charge mechanism (RCM), issue bill of supply instead tax invoice, not charging tax from recipients etc., besides filing quarterly returns GSTR (GSTR-4) and annual return GSTR Nine A(GSTR 9A).

8) What are the different tax rates under the Composition Scheme for different types of businesses?

Under the composition scheme rates varies according to the nature of the business. CGST rate 0.5% SGST rate 0.5% total 1% is applicable on manufacturers traders(goods). Restaurants other than those serving alcohol come under the 5 % slab while Service Providers and Manufacturers of certain goods attract cumulative tax liability of @6%.

9) How does the Composition Scheme benefit small businesses?

The composition scheme simplifies tax compliance for small businesses as it provides them with fixed tax payments based on their turnover thereby reducing paperwork etc so that they can concentrate more on their core activities.

10) What tax rate do restaurants have to pay when they opt for the Composition Scheme and do not serve alcohol?

Restaurants that do not serve alcohol and choose the Composition Scheme must pay a tax rate of 5% (2.5% CGST + 2.5% SGST) on their turnover.

11) What is the tax rate for service providers opting for the Composition Scheme?

Service providers under the Composite Scheme are required to pay a tax rate of 6% (3% CGST + 3% SGST) on their turnover.

12) What is the difference in tax rates between regular taxpayers and businesses under the Composition Scheme?

Regular taxpayers are subject to multiple tax rates ranging from 5% to 28%, while businesses under the Composite Scheme pay a fixed percentage of their turnover as tax depending on their category (manufacturers, traders, or service providers).

13) What are the benefits of having lower tax rates under the Composition Scheme?

Lower tax rates reduce compliance burdens for small businesses and provide them with more liquidity by allowing them to pay lesser taxes compared to regular taxpayers.

14) Can businesses availing themselves of the Composition Scheme charge GST on their supplies?

No, businesses registered under the Composite Scheme cannot charge GST on their supplies as they are already paying a fixed percentage of their turnover as tax.

15) Is input tax credit available for businesses under the Composition Scheme?

No, composition dealers cannot claim input tax credit since they are not required to maintain detailed records of purchases made from suppliers who charge GST.

16) Are there any restrictions or conditions for businesses opting for lower tax rates through the Composition Scheme?

Yes, businesses opting for lower tax rates must comply with certain conditions such as not collecting GST from customers, not claiming input tax credit, and not engaging in inter-state supplies (except manufacturers).

17) Can businesses switch from the Composition Scheme to regular taxpayer status or vice versa?

Yes, businesses can choose to switch between the Composite Scheme and regular taxpayer status by following the prescribed procedures and fulfilling the requirements under GST laws.

Restaurants that do not serve alcohol have to pay 5% (2.5% CGST + 2.5% SGST) tax on their turnover under the Composition Scheme.

18) What is the tax rate for service providers under the Composition Scheme?

Service providers who opt for the Composition Scheme are required to pay a total of 6% (3% CGST + 3% SGST) tax on their turnover.

19) Can manufacturers of bricks and building materials avail the Composition Scheme and what is their tax rate?

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

20) What are the advantages of being a Composition Dealer under GST?

Some benefits include easy compliance, lower fixed tax rates, no input tax credit (ITC) but simple tax calculations, less liability and more focus on business.

21) Can businesses choose the Composition Scheme irrespective of their turnover?

No, they need to fulfill certain eligibility requirements along with meeting prescribed turnover limit criteria (₹1.5 crore as per latest update) for opting into GST’s composition scheme.

22) How can businesses verify current rates & eligibility conditions for the Composition Scheme?

They should refer to official notifications issued by GST authorities or consult with professional experts in taxation matters who will be up-to-date about applicable taxes rates as well as thresholds under this scheme. You should also visit the alerttax.in website for updated information about GST composition Scheme and doubts.

23) Is ITC available to businesses registered under this scheme?

No, firms enrolled here are barred from claiming Input Tax Credit(ITC). They have to pay taxes at fixed percentage slabs based on turnovers(don’t allow adjustments against purchase taxes paid).

24) Are there any penalties associated with non-compliance or misuse of the scheme?

Failure to comply with its provisions could attract penalties including disqualification from it; therefore one should follow all rules laid down under composition scheme so as to avoid such eventualities.

25) Can a business switch between the Composition Scheme and regular GST filing?

Yes, but subject to conditions specified by authorities in this regard; hence one should always consult tax experts prior switching over to different types of returns filing mechanisms available under the Goods & Services Tax system.