What is Composition Scheme Under GST Act?
Composition Scheme is a kind tax collection process under GST Act., 2017. And it is designed by keeping the small tax payers in mind which will give them to file the returns easily and with less tax compliance.
The Composition Scheme under GST is designed for small tax payers. This scheme is an optional and simple to file the Tax Returns and reduces the tax compliance cost for the small tax payers. Section 10 of the CGST Act, 2017 deals with the Composition Scheme.
Returns filed by Composite Tax Payer is simpler, compared to that of the Returns filed by Other Tax Payers under GST Act. Even the Invoice model is also simple.
As per section 10 (1) of the CGST Act, 2017. A Registered Person, whose Aggregate Turnover in the preceding Financial Year did not exceeds Rs. 1.5 crore, may opt to pay tax under Composition Scheme, and in case of the following States of India limit is Rs 75.
- Arunachal Pradesh
- Assam
- Manipar
- Meghalaya
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Himachal Pradesh
As per [Notification no. 8/2017-Central Tax 27-06-2017] threshold for composition scheme Rs. 75 Lakh for specified states Rs. 50 Lakh. But as per the latest updates on 23rd GST Council Meeting held on 10th Nov 2017 threshold for composition scheme to be increased to Rs. 1.5 crore (from earlier 1 crore)
But, he has to abide by to the conditions specified in Section 9 (3) and 9 (4) of the Act.
- Section 9 (3) : As per this sub-section Tax Payer has to pay the tax on Reverse Charges Mechanism for Specified Goods or Services or both notified by the Government.
- Section 9 (4) : As per this sub-section Tax Payer has to pay the tax on inward supply of Taxable Goods or Taxable Services or both from the Unregistered Person.
The Tax Payer who opted to Composition Levy is not required to pay tax on normal tax rates specified in Annexures instead he has to pay tax on Turnover as specified in Section 10 (1) (a) or (b), or (c), which is applicable for the nature of the Tax Payer business.
This is the basic understanding of the Composition Scheme under GST. Still we need to understand eligibility, Tax Rates, Rules and Regulation in the Scheme.
