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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.
On 21st July 2018, the GST Council has reduced the tax rates on most of the items that are used in day-to-day life. Electrical appliances such as TV (up to 27’’), Washing Machine, Refrigerator, Mixer, Juicer, Grinder etc. have been reduced from 28% GST Slab Rate to 18% GST Slab Rate. Not only this, the Sanitary Napkins have been exempted from the GST Rates. These new rates will come into an effect from 27th July 2018. The rate reductions are estimated to cost the Government exchequer nearly Rs 7000 Crore.
Earlier, the Council had revised the tax rates on 29 Items in January 2018. In November 2017, the Council had brought down over 200 Items from 28%, 18%, and 12% into lower tax brackets.
The decisions taken in the 28th GST Council Meeting Updates are as follows-
Quarterly Returns have been approved for the Tax Payers who have a turnover of less than Rs 5 Core (tax payments will be continued on the monthly basis).
White Goods such as Refrigerator, Washing Machines, TV (up to 27’’), Grinders. Juicers, Mixers, Electric Iron, Water heaters and Coolers, Video Games, Shaver’s, Lithium Iron Batteries etc. have been cut down from 28% to 18% GST Slab Rates.
Sanitary Napkins have been exempted from GST Tax Rate.
GST on Bamboo Flooring has been put under 12% GST Slab.
Hotels to be taxed on actual tariff basis, not on the declared tariff.
Rates on paints, wall putty, and Varnish have been dropped down from 28 percent to 18% percent.
Common use foot wares worth Rs 1000/- will be taxed 5% GST.
Ethanol Oil for Companies will be taxed for 5%.
GST Rates of the Leather Goods has been reduced from 28% to 18% GST Tax Rate Slab.
GST Rates cut to 18% for special purpose vehicles, work truck, trailers.
Rates on scents, toilet spray, are now under 18% GST Slab.
Marbles, Stones, Wood deities have been exempted from GST. Rakhis, fortified Milk, are also exempted.
Handicraft Items will be now taxed at 12%.
The GST Rates on Handbags, jewelry box, wooden box for paintings, art ware for paintings, handmade lamps etc. are reduced to 12%.
GST on imported UREA has been reduced to 5%.
The GST Council have not come up with the decision on sugar cess. This will be decided in the next meeting of GST Council. The GST Council has cleared 48 amendments which will be passed in the Parliament. The Council will be introducing RFID Tags along with Goods and Services Tax Network (GSTN) for transporters to reduce harassment of transporters.