COMPOSITION SCHEME FOR TRADER

Q1. Who can opt for Composition Scheme?

Ans. Businesses dealing only in goods can only opt for composition scheme. 

Services providers have been kept outside the scope of this scheme.

This holds true if your annual turnover is below Rs 50 Lakhs.

Q2. What is the tax rate applicable on a composition dealer?

Ans.  1% for manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of turnover.

Q3. Must a Composition Dealer maintain detailed records?

Ans. No, 

Q4. Do Composition Dealers have the option to avail Input Tax Credit?

Ans. No, a Composition Dealer is not allowed to avail input tax credit of GST paid to their supplier.

Q5. Can a Composition Dealer issue Tax Invoice?

Ans. No.  A buyer from composition dealer will not be able to claim input tax on such goods.

Q6. Which returns are required to be filed by a taxable person registered under Composite Scheme?

Ans.  GSTR-4 on a quarterly basis and an annual return in FORM GSTR-9A.

Q7. Is liability to pay taxes under Reverse Charge Mechanism covered under the Composite Scheme?

Ans. Any tax payable under Reverse Charge Mechanism will not be covered under the scheme. These taxes will be liable to be paid as a normal tax payer.

Q8. Can a Composition Dealer collect composition tax separately?

Ans. No, a Composition Dealer is not allowed to collect composition tax from the buyer.

Q9. What is the threshold limit to be eligible for Composition Scheme?

Ans. Any dealer whose aggregate turnover in a financial year does not exceed Rs. 50 Lakh can opt for composition scheme

Q11. Can a dealer involved in interstate supplies opt for Composition Scheme?

Ans. No, Composition Scheme is available only for intra-state supplies. If a dealer is involved in inter-State supplies, then he cannot opt for the scheme.

Q12. What are the penalties applicable on Composition Dealer in case of any default in tax payment?

Ans. If the tax administration has reason to believe that a composition dealer has wrongly availed the benefit under the composition scheme, then such a person shall be liable to pay all the taxes which he would have paid under the normal scheme. Also, he will be liable to pay a penalty equivalent to an amount of tax payable.This penalty will not be levied without giving a show cause notice to the dealer.

Q13. What are the transition provisions if a business transits from Composition Scheme under current regime to Regular Taxation under GST?

Ans. Taxpayers registered under composition scheme under the current regime will be allowed to take credit of input held in stock, or in semi-finished goods or in finished goods on the day immediately preceding the date from which they opt to be taxed as a regular tax payer.