Composition Dealer under GST

Goods and service tax is a game changer because, with its implementation, there is a tremendous outflow of benefits. Earlier in India, there were numerous taxes such as Service Tax, VAT, Excise and many others that were ultimately borne by consumers leading to double taxation or having a cascading effect. Post GST, around 17 taxes are subsumed under one tax regime.

GST applies to almost every business, thereby it has boosted the revenues for the government. While purchasing goods or services both CGST and SGST i.e. both central and state taxes are levied thereby eliminating all confusion.

With the introduction of GST, a new regime of business compliance are established. Big organizations in India have the required resources and expertise that can facilitate compliance procedures. On the other hand, small and medium enterprises (SMEs) and start-ups will have difficulty in complying with these provisions. Thus, to lower the burden of compliance for small businesses, a composition scheme has been introduced under GST law where the assessees have to pay tax at a minimum rate based on their turnover.

Eligibility for GST Composition Scheme:

Getting registered under composition scheme is optional and voluntary. Any business which has a turnover of less than Rs. One crore Fifty lakhs (For specified states other than Jammu & Kashmir Turnover Limit is 75 Lakhs and for Jammu and Kashmir it is One Crore) can opt for this scheme but on any given day, if turnover crosses the above-mentioned limit, then he becomes ineligible and has to take registration under the regular scheme. There are certain conditions that need to be fulfilled before opting for composition levy:

1. Any assessee who only deals in supply of goods can opt for this scheme that means this provision is not applicable to service providers. However, restaurant service providers are excluded.

2. There should not be any interstate supply of goods that means businesses having an only intra-state supply of goods are eligible.

3. Any dealer who is supplying goods through electronic commerce operator will be barred from being registered under the composition scheme.

4. Composition scheme is levied for all business verticals with the same PAN. A taxable person will not have the option to select a composition scheme for one, opt to pay taxes for other.

GST Rate for Composition Dealer:

Types of DealersCGSTSCGTTotal
Manufacturer0.50%0.50%1.00%
Restaurant not supplying alcoholic liquor2.50%2.50%5.00%
Other eligible suppliers0.50%0.50%1.00%

Dealers are not allowed to collect composition tax from the recipient of supplies, and neither are they allowed to take Input Tax Credit.
If the person is not eligible under composition scheme, tax liability shall be TAX + Interest and penalty which shall be equal to the amount of tax.

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