In every tax system, there are certain actions which need to be taken to validate the statutory provisions like filing timely returns and maintaining prescribed records, periodic payment of taxes. However, the small business enterprises (SMEs) constantly combat while dealing with such requirements due to lack of knowledge and expertise. Hence, to reduce the burden of compliance for small businesses, a composition scheme has been introduced where the enterprises can pay tax at a minimum rate based on their turnover.
Composition scheme is an extension of current Value Added Tax (VAT) law scheme where taxpayers are mandated to file summarized returns on a quarterly basis, instead of three months returns.
Key Features of GST Composition Scheme
- A tax rate under GST composition scheme is expected to be 1% to 3%.
- Enterprises come under GST composition scheme do not qualify for Input Tax Credit under section 16.
- Local suppliers, who supply goods within the state, are eligible for GST Composition Scheme. Enterprises dealing in interstate supply of goods will fall under regular tax scheme.
- Getting registered under GST composition scheme is voluntary and optional.
- Under GST composition scheme, tax payers need to submit a bill of supply instead of invoice of the tax to the tax authorities.
Rate of Tax under Composition Scheme
There are 3 different rates under GST Composition Scheme:
|Category||Rate of Tax|
|Manufacturer, other than the manufacturer of the goods as notified by the Govt.||One percent|
|Suppliers of Goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption)||Two & a half percent|
|Any other eligible supplier||Half percent|
Eligibility Criteria for GST Composition Scheme
There are limitations of GST composition scheme. Not everyone can enrol under this scheme. Any enterprise which has a turnover less than 50 Lakh can opt for this scheme, crossing the limit, will be disentitled from the scheme and will register them in a regular scheme.
- This provision is for suppliers dealing in goods. Service providers are exempted from this scheme. However, restaurant service providers are excluded.
- The scheme is only for intra state supply of goods.
- Dealer supplying goods through e – commerce sites are not eligible for the scheme such as (Flipkart, Amazon, e – bay etc)
- In case the registered person under GST found ineligible for the scheme, then the tax authority can impose a penalty equal to the amount of tax on such person along with his tax liability.
Registration under Composition Scheme
Any desirable tax payer can enrol themselves under GST Composition Scheme from the beginning of the financial year. The application will have to be filed on or before 31st March of the Previous Year so that returns can be filed accordingly.
Dealers under composition scheme can switch to the regular scheme during the year. However, they cannot switch to composition scheme again during the same financial year.
Returns under Composition Scheme
Under composition scheme, a registered taxable person shall furnish a return for each quarter in a prescribed form in the prescribed manner within eighteen days after the end of a relevant quarter.
Registered tax payer under GST composition scheme should adhere to the GSTR 4, which is a tax return form prescribed by the Government.
Benefits under Composition Scheme
Under GST, a normal taxpayer is required to file at least 3 returns monthly and 1 return annually. Whereas, in composition scheme, only a quarterly return will be uploaded under GSTR – 4.
Reduced Tax Liability
Under GST composition scheme, the rates are very low from 1% for manufacturers to 2.5% for restaurant service providers and 0.5% for other suppliers of turnover.
|Particulars||Description||Registered as a normal tax payer||Description||Registered as a tax payer under composition scheme|
|A||Total Sales Value||118000||Total Sales Value||118000|
|B||Sales Value exclusive of taxes||100000||Sales Value exclusive of taxes||115686|
|C||GST @ 18% on sales value||18000||GST @ 18% on sales value||2314*|
|D||Input Purchases||65000||Input Purchases||65000|
|E||GST @ 18%||11700||GST @ 18%||11700|
|F||Total Purchase Value (D+E)||76700||Total Purchase Value (D+E)||76700|
|G||Net GST Liability (C–E)||6300||Net GST Liability (C–E)||2314|
Restrictions under Composition Dealer
Following are the restrictions on the composite dealer:
- He is neither a causal dealer nor a Non-resident taxable person
- He belongs to a place outside India
- Goods have not been purchased from an unregistered supplier and where purchased he pays tax as per the provisions of the act.
- He is required to pay central tax under reverse charge for the inward supplies of goods or services or both.
- He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him.
- He shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place of business and at every additional place or places of business.
The country is currently going through a taxation reconstruction phase which is Goods and Service Tax (GST), the largest indirect taxation reform of the country since 1947. GST is a single tax levied on the supply of goods and services from the manufacturer to the end consumer. It has replaced all the major indirect taxes such as Value Added Tax (VAT), Excise Duty, Service Tax, Central Sales Tax (CST), Custom Duty etc. This step towards making India ‘One Nation One Market’ will make the economy of the country more transparent, systematic and organized.
What are GST Returns
Goods and Service Tax (GST) returns are the documents which contains all the information of income filed by the taxpayers with the tax administrative authorities. Every person who has registered themselves on the GST portal is supposed to share their business information by filing GST returns online. Business information that includes:
- Tax paid
- Tax collected
- Output GST (On sales)
- Input Tax Credit (GST paid on purchase)
Eligibility to Get Registered Under GST
Below is the list of some of the eligibility criteria who are required to register themselves under GST:
- Any business with a turnover of Rs. 20 lakhs in a financial year (1st April to end of March). For north eastern or hilly states, the turnover has to be more than Rs. 10 lakhs.
- Any business person who is registered under earlier law of Value Added Tax (VAT), Excise Duty, Service Tax etc. are required to register under GST.
- Anyone who drives inter – state supply of goods
- Casual taxable person
- Non-Resident taxable person
- Agents of a supplier
- Input Service Distributor
- E – Commerce Distributor or Aggregator
- Person who supplies via e-commerce aggregator
Different Types of GST Returns
GST returns to be Filed by ‘Normal Tax Payer’ / ‘Casual Tax Payer’
Normal Tax Payer / Casual Tax Payer – A Casual or a Normal Taxable person are those who supply goods and services in a territory where GST is applicable but does not have any fixed place of business.
- GSTR 1 – GSTR 1 contains information of all the outward supplies i.e. sales. Any registered dealer is supposed to pay a monthly return i.e. GSTR 1. “The GSTR 1 filed by a registered dealer is used by the government to auto populate GSTR 3 for the dealer”.
Note the following registered person is exempted from filing GSTR 1:
(a) Input Service Distributor
(b) Composition Dealer
(c) Non – resident taxable person
(d) Taxpayer liable to collect Tax Collected at Source (TCS)
(e) Taxpayer liable to deduct Tax Deducted at Source (TDS)
- GSTR 1A – GSTR 1A contains the details of auto drafted supplies of goods or services.
- GSTR 2 – Under GSTR 2, registered taxable recipient should file details of inward supplies of taxable goods and services claiming input tax credit. Due date of filing GSTR 2 is 15th of the subsequent month.
- GSTR 3 – Under GSTR 3, the monthly return has to be paid on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax. Due date of filing GSTR 3 is 20th of the subsequent month.
- GSTR 9 – Under GSTR the return has to be paid annually. Due date of filing GSTR 9 is 31st December of next financial year.
- GSTR 3B – GSTR 3B is a simple return that businesses need to file in the first two months of GST (July and August, 2017).
GST returns to be Filed by Composition Tax Payers
In composition scheme under GST, a taxpayer is required to file summarized returns on a quarterly basis, instead of three monthly returns.
- GSTR 4 – Taxpayers with small business or a turnover of up to Rs.75 lakh can opt for the Composition Scheme. Taxpayers under composition scheme will not have input tax credit facility. Due date of filing GSTR 4 is 18th of the subsequent month.
- GSTR 9A – GSTR 9A is an annual return form for composition taxpayers. Due date of filing GSTR 9A is 31st December of next financial year.
GST Returns to be filed by Foreign Non-Resident Taxpayer
Non – resident taxable person is someone who does not have a fixed place of business in India. However, he occasionally sells goods and services in a territory of India where GST applies.
- GSTR 5 – This form contains details of imports, outward supplies, input tax credits and other related information. Due date of filing GSTR 5 is 20th of the subsequent month.
GST Returns to be filed by an Input Service Distributor
- GSTR 6 – GSTR 6 is generated when the Input Service Distributor confirms the details mentioned in GSTR 6A. Due date of filing GSTR 6 is 13th of the subsequent month.
- GSTR 6A – The details in GSTR 6A are auto-populated by the information provided by the inward suppliers. The due date of filing GSTR 6A is 10th of the subsequent month.
GST Returns to be filed by a Tax Deduction
- GSTR 7 – GSTR 7 contains the details of tax deductions made during the month. Due date of filing GSTR 7 is 10th of the subsequent month.
- GSTR 7A – GSTR 7A contains the details of the total tax deducted and amount paid in a month. Due date of filing GSTR 7A is 10th of the subsequent month.
GST Returns to be filed by an E-Commerce Portal
- GSTR 8 – This form contains the data of goods supplied by E-commerce portals as well as the amount of tax collected. The due date of filing GSTR 8 is 10th of the subsequent month.
How to File GST Returns Online?Follow the below steps to file GST Returns online
- Visit the GST official site https://www.gst.gov.in
- One will receive a 15 – digit identification number based on their State Code and PAN Number.
- Upload invoices such as outward return, inward return and cumulative monthly return. Note: [An invoice reference number will be issued against each invoice].
- In case of any error, one will have the option to correct it refile the return.
The much awaited Goods and Service Tax (GST) has been introduced on and from July 1st 2017. In the new taxation system, instead of various taxes like Value Added Tax (VAT), Excise Duty, Service Tax, Central Sales Tax (CST), Customs Duty etc, there will be one tax known as Goods and Service Tax (GST).
While celebrations marked the successful implementation of most ambitious New Single Indirect Tax Regime, confusion and anxiety kicked in amongst the consumers and traders. Hence, Central Board of Excise and Custom (CBEC) launched the one stop GST facilitation centre in February 2017, in order to assist tax payers and businesses uploading GST returns.
Needs of GST Seva Kendra
GST Seva Kendra started off to prepare India for the newly reformed taxation system i.e. GST – Goods and Service Tax. After two months of its implementation most of the India is now GST registered hence, GST Seva Kendra is now set for further assistance like GST migration and GST return filing.
Services Offered at GST Seva Kendra
- Information brochures, documents, Trade Notices, forms etc.
- Assistance to taxpayers in helping them understands legal provisions, procedures and documents.
- Helping with the expeditious disposal of their GST applications, references etc. pending with any Departmental authority in the Commissionerate.
- Assisting the taxpayers in getting requisite support from GSTN / DG Systems, CBIC.
- Enhancing taxpayer satisfaction under GST, an area of critical importance to Government, by careful analysis of the prescribed ‘Taxpayer Satisfaction Forms’ for identifying areas of improvement.
How to Find a GST Seva Kendra
The Central Board of Excise and Custom has opened more than 8000 Seva Kendra Centres across the nation in all the districts. All Seva Kendra’s are connected to the GST Network and Central Board of Excise and Customs portals and is manned by trained officers.
- GST Seva Kendra’s are open from 9:30 am to 5:30 pm on all working days.
- One can walk into these offices or they can also take appointment before the visit.
GST Seva Kendra Centres in Major Cities
- Delhi – There are more than 202 GST Seva Kendra offices in Delhi
- Mumbai – There are more than 178 GST Seva Kendra offices in Mumbai
- Bengaluru – There are over 50GST Seva Kendra Centres in Bengaluru.
- Kolkata – There are more than 194 GST Seva Kendra Centres in Kolkata
- Hyderabad – There are more 70 GST Seva Kendra Centres in Hyderabad
- Chennai – There are more than 55 GST Seva Kendra Centres in Chennai.
Find more details about GST Seva Kendra at CBEC Official website @ www.cbec.gov.in
The GSTIN is otherwise called as the GST Identification Number. All the business entities registering under GST are provided with a unique identification number called as GSTIN. This number is similar to that of the existing TIN Number that is the Tax Identification Number. This is a single type registration number for everyone who falls under the GST regime. People can apply for the GST registration in form GST REG-06 for the principal face of the business that is available on a common portal. This registration is valid for all the places of business in the state.
Format of GSTIN
The Goods and Service Tax Identification Number is based on the following format:
- First two character of the State Code
- Next Ten Characters of the PAN or the Tax Deductions or the Collection Account Number.
- Next two characters for the entity code
- The last digit denotes the sum of all the characters
Like for an Example:
22 AAAAA0000A 1 Z 5
This is the official format of a GSTIN. The 22 represents the State Code as per the Indian Census 2011. The AAAAA0000A represents the PAN number of the applicant. 1 is the Entity Number of the same identity of the PAN Holder in a state. The alphabet “Z” is set by default. Whereas, the number 5 is the sum of all the number characters (2+2+1=5).
How To Apply For GSTIN
This is a part of a GST registration process. The Government allots a 15 digit GSTIN Number. All you have to do is go to the official website of www.gst.gov.in
There are two ways to register for GST
- via an online portal
- via GST Seva Kendra set up by the Government of India.
Once the GST is approved by the GST officer, a unique GSTIN is allocated to the dealer.
Documents Required to Apply for a GSTIN
The following are the details for applying a GST:
- Valid Permanent Number (PAN)
- Valid Indian Mobile Phone Number
- Valid email Address
- Prescribed Documents and information on all the mandatory fields of Registration Application.
- Place of Business
- An authorized signature of the resident of India with valid details including the PAN.
- At least one proprietor/Partner/Trustee/Director/Karta/Member with Corresponding PAN.
- IFSC Code of the same bank and branch.
- Valid Bank Account Number from India.
- Jurisdiction details.
Cost Of Applying and Validity
The cost for obtaining a GST and GSTIN is free. The GST registration for the regular tax payers do not have any expiry date and is valid until it is surrendered and canceled. The GST registration for the non-residential tax payer and casual taxable persons are valid until the date is mentioned in the certificate.
How To Check A GST Application Status
If you have applied for a GST registration then it normally takes 7 working days to generate a provisional GST Identification Number and it requires 10 days to obtain the final GST Identification Number along with the GST Registration Number.
- Go to the GST Portal: www.gst.gov.in
- When you visit the GST Portal click on the services-registration- Track Application Status
- A box is displayed requesting you to enter the ARN Number.
- Enter the ARN number of the GST registration application in the place provided and enter the Captcha.
- After providing the ARN number, the information about the GST registration application status is displayed below.
- If the GST registration application is approved then the approved message status will be displayed next to the status information.
Being a registered GST dealer, it is important to verify the GST Identification Number before entering it into the GST Returns. The GST Portal enables the businesses to verify the GSTIN.
Step By Step Procedure To Verify GST Identification Number:
- Visit the GST Portal. Login to the GST Portal.
- Enter the login Username and Password provided during the registration.
- After logging in, a page appears where an option of Search Tax Payer is displayed on the menu bar. In the drop down go to search by GSTIN/ UIN.
- Now enter the GSTIN or the GST Number of the dealer and Click on Search.
- If the GSTIN is correct then you will get all the details and information regarding the dealers, whereas, if your GST Identification Number is wrong then an error message will be shown on the screen. In this case, you will have to contact the vendor and get your GST Identification Number corrected.
If the GST is correct, then these are the following details that are displayed on the screen:
- Legal Name of the Business
- The State of the applicant.
- Date of registration- It is the date when you have applied for the GST, i.e GST Registration date.
- Construction of the Business- Company, Sole Proprietor or Partnership.
- Type of Tax Payer- A regular tax payer or a composition dealer.
Goods and Service Tax (GST) is the first significant step towards indirect tax reform in the last thirty years. It replaces all indirect taxes levied on goods and services by the Indian Central and State governments. Hence, it is considered as the biggest tax reform in India.
However, there are always two sides of a coin. Similarly, Goods and Service Tax (GST) also has its fair share of advantages and disadvantages.
Advantages of Goods and Service Tax (GST)
- After GST, India has transformed into One Nation One Market and One Tax. Now with the unified tax regime, the country waved a good bye to a big pile of indirect taxes.
- GST simplifies the tax system by reducing the number of indirect taxes such as Value Added Tax (VAT), Excise Duty, Entertainment Tax, Luxury Tax etc. and makes it a more transparent tax system. It is easy to understand and cheaper to implement at various levels.
- There will be no hidden taxes under GST and the cost of doing business will be lower which will encourage more economic growth in the country.
- After GST it will be cheaper to buy input goods and services for production from other states.
- GST helps to remove the “cascading effect” or “tax on tax” i.e. everyone is liable to pay tax from purchaser to the end consumer. This taxation is known as “Cascading effect of taxation”. And GST avoids this taxation system as under GST tax is calculated only on the Value Added.
- GST helps in avoiding conflict of dominion as it has Central GST and State GST the tax applicable on goods and services being exported and imported between states in India would fall under an Integrated GST (GST) system.
- Under GST prices will come down which in turn will help companies as consumption will increase.
- GST will also help to curb the flow of black money in the country. As GST is the single tax on goods and services right from manufacturer to the consumer. Credits of input tax on each level are available in a subsequent stage of value addition. To get the previously paid taxes everyone will insist on the invoice (pakka bill) and it will have a paper trail and income tax department can access. Also, PAN and Aadhaar are required to file GST return.
- Ease of doing business –As in the new tax system of India GST, there is single registration, single return, and less paper work unlike in the previous taxation system where business men had to get various tax authorities for the registration, maintain many papers and file different tax returns to different tax authorities.
- Logistic industry plays an important role in supplying goods from one territory to the other which helps grow in manufacturing and consumption. Under GST goods can move freely from one state to another.
Disadvantages of Goods and Service Tax
- There are certain sectors which are exempted from Goods and Service Tax (GST). Though it has a minimal exemption list. For example, GST is not applicable on alcohol for human consumption. Hence, alcohol rates will not get any advantage of GST.
- According to a source, GST has a negative impact on the real estate sector. It would increase the cost up to 8 percent to the new homes and reduce demand by about 12 percent.
- Some retail products used to stand in 4 percent of the tax on them. However, after GST, the garments and clothes became more expensive.
- Stamp duties are still inflicted on States; it has not come under Goods and Services Tax (GST).
- In the earlier taxation system, service taxes on air fares used to range from six to nine percent. But under GST, the rate will exceed fifteen percent and effectively double the tax rate.
- GST has shifted from pen to paper, as it is an online taxation system. Hence, it is difficult for small businesses to adopt it quickly.