There are several businesses that do not earn more than 75 lakhs and have to pay the tax under the GST regime. People are confused about the rules and they need to know about the composition scheme introduced under the GST. The large industries have accounting professionals to take care of their business requirements and tax calculation, however when it comes to small businesses they lack such resources and that’s the reason government has introduced such a scheme that could help small enterprises to secure their future. The composition scheme is a scheme designed especially for small businesses whose annual turnover is more than 20 lakhs and less than 75 lakhs. Under this scheme, the businesses need to pay a nominal amount as tax so that they can focus more on their business growth rather than worrying about filing taxes. In this post, we list all the details about the composition scheme.
What is Composition Scheme?
Composition scheme is a scheme that helps in GST exemption for small businesses and is one of the most convenient ways to pay taxes and be a part of the GST regime. By getting registered under the GST you eliminate all the formalities and pay tax according to the fixed rate based on the businesses turnover. However, there are few drawbacks of being a part of this scheme is that you cannot avail the benefit of the Input Tax Credit, cannot collect the tax from the other taxpayers and the customers. If you have registered under this scheme you need to file a summarized returns on a quarterly basis instead of filing them on every three month.
In order to know about GST composition scheme, you need to know its key features and the eligibility criteria.
- If the person is earning less than 75 lakhs, he or she is eligible for the getting registered under the GST.
- The person once registered under the composition scheme, he or she has to follow the fixed tax rate on the total sales turnover.
- Registered person is not eligible for the benefit of input tax credit.
- The scheme applies only for Intra-state supplies
- Quarterly returns have to be filed instead of every three months
- Needs to submit a bill of supply instead of a tax invoice
Eligibility for the Composition Scheme
Those who comes under the taxable slab are eligible for getting registered under the GST composition scheme.
- Person who deals with the supply of goods and services within the state is eligible for the registration under this scheme.
- Person who supplies tax leviable goods
- Person whose annual turnover is less than 75 lakhs
- Person should not be into e-commerce business
Is it Beneficial to get Register Under the composition scheme?
Yes, it is beneficial for the small businesses to get register under this schemes as they do not require to maintain records of invoices and other data, hassle free payments options are given to them and they have to file the returns after every six months which is again a simple and easier way to file taxes. This way, small businesses can focus more on their business productivity goals, growth and benefits.
GST exemption for small businesses is provided by the government in the form of the composition scheme. Therefore, business must opt for it and grow their business in order to survive in the competitive market. All they need to do is eliminate all the negative thoughts and doubts regarding the GST and different schemes and get ready for the big change. Also, make sure you follow the rules of the GST to avoid any penalties that might you have to bear in case of any faults found in your business or for not paying the tax on time.