Composition scheme for service providers
It was in the 32nd GST Council Meeting held on 10th January 2019 where the decision to extend the benefit of the composition scheme to service providers was taken. Earlier the benefit of the composition scheme was available only to manufacturers of goods, traders of goods, and Restaurants.
Who can opt for the compositions scheme as per CGST(R) Notification 2/2019?
Registered persons providing goods or services or both up to an annual aggregate turnover of Rs. 50 lakhs can opt for the composition scheme on or after the 1st day of April in any financial year.
In order to determine eligibility under the scheme
⊗ If a person wants to opt for the above composition scheme then aggregate turnover for all the business under the same PAN will be considered collectively irrespective of different GST numbers.
⊗ If a person wants to opt for the above composition scheme then aggregate turnover will not include the value of exempt services like extending deposits, loans or advances to the extent the consideration is represented by way of interest or discount.
⊗ To determine whether a person is eligible for the above scheme or not, supplies from 1st April of a financial year will be considered while checking the annual aggregate turnover of Rs. 50 lakhs.
⊗ BUT for the purpose of levy of taxation
In case of new taxpayer/fresh registration –Tax from the date of registration(when becomes eligible to register) to end of the financial year.
In case of the change from regular to composition scheme –Tax from the first day of the financial year to end of the financial year.
Who can not opt for the composition scheme as per CGST(R) Notification 2/2019?
Following registered persons cannot opt for composition scheme as per CGST(R) Notification 2/2019 applicable to service providers
If the annual aggregate turnover in the preceding financial year exceeded Rs. 50 lakhs
If the registered person is availing the benefit of composition levy u/s 10(1).
If the person is engaged in making any supply that is not leviable to tax under the GST Act.
If the person is engaged in any inter-state supply.
If the person is a casual taxable person.
If the person is a non-resident taxable person.
If the person is making any supply through an electronic commerce operator. As an e-commerce operator has to deduct TCS u/s 52.
If the person is engaged in making the supply of
- Ice cream and other edible ice, whether or not containing cocoa (Tariff item 2105 00 00)
- Pan masala (Tariff item 2106 90 20)
- All goods, i.e. Tobacco and manufactured tobacco substitutes (Tariff item 24).
What will be the tax rate for service providers under the composition scheme as per CGST(R) Notification 2/2019?
For the service providers who would like to register or move to the composition scheme from regular taxpayers will have to pay tax @ 6% (3% CGST + 3% SGST).
Note: If the taxpayer opts for the scheme will have to pay tax @ 6% on all the supplies made by him. The taxpayer will not get any benefit of any notification issued u/s 9(1) or u/s 11.
[Section 9(1) – GST shall be levied and collected on all intra-State supplies of goods or services or both at the rate below 20%. (except for supply of alcoholic liquor for human consumption, for the supply of petroleum crude, diesel, petrol, natural gas, and ATF)
Section 11 – If Govt specifically grants an exemption from tax in respect of any goods or services or both by issuing a notification. ]
What are other conditions applicable to service providers availing composition scheme?
The registered person shall not be entitled to make any supplies to other states. (only intra-state allowed)
The registered person shall not be entitled to collect any tax from the recipient of supplies made by him.
The registered person shall not be entitled to avail any ITC.
The registered person will issue a bill of supply instead of a tax invoice.
- The following needs to be printed on every bill of supply “taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies”.
Procedure to opt for the composition scheme as per CGST(R) Notification 2/2019?
File the FORM GST REG-01 online on the GST portal.
Procedure to shift to composition scheme as per CGST(R) Notification 2/2019 from regular scheme?
File the FORM GST CMP-02 online on the GST portal.
Reverse the ITC availed in FORM GST ITC-03
⊗ which is equivalent to the credit of ITC in respect of stock of inputs held, semi-finished goods held, finished goods held, and capital goods
⊗ by either debiting the electronic credit ledger or electronic cash ledger.
⊗ and if any further balance in the electronic credit ledger then that credit shall lapse.
Which GST return needs to be filed by service providers opting for a composition scheme?
QUARTERLY PAYMENT: The registered person who opts for the composition scheme as per CGST(R) Notification no. 2/2019 will have to file a statement of payment quarterly in the FORM CMP – 08. The due date is the 18th of the month after the end of the quarter.
ANNUALLY RETURN: The registered person who opts for the composition scheme as per CGST(R) Notification no. 2/2019 will have to file only one return in the FORM GSTR-4. The due date is the 30th April after the end of the financial year.