What is composition tax?Composition tax is a scheme to bring simplicity & reduce the compliance cost for small taxpayers by an alternative method of paying tax whose turnover is below 1.5 crores (75 lakhs for north-eastern states & Himachal Pradesh)
Am I eligible?
All retail stores, including e-commerce operators, are eligible if you fall under the specified turnover.
And who is not eligible?
(a) Those who want to avail - Casual taxable person number
(b) A person who wants to make inter-state sales
(c) A non-resident taxable person
(d) Those who sell 'non-taxable' goods
(e) Those who sell through other e-commerce operators
Can I not have GST registration at all?
GST registration is not required for those online/offline operators whose turnover is below 20 lakhs, but you are not eligible to sell outside your state.
Can businesses under the composition scheme export?
No. Supplies made outside India (export) will be treated as inter-state supplies.
What is the tax rate under the composition tax scheme?
Restaurants (not serving alcohol) - 5% tax
Manufacturers & traders - 1% tax
Service providers - 6% tax
Can I, who is under GST, opt for composition tax?
Yes, you need to intimate electronically in Form GST CMP-02 but from the beginning of the financial year only. You also need to submit a stock statement within 60 days. One business entity can have multiple "composition scheme registration", under the same PAN number, in different states & pay tax accordingly.
What are the advantages of being under composition tax?
(1) You pay tax quarterly in a simplified format.
(2) Instead of collecting 5% or 12% tax from customers, you pay 1% from your pocket.
What are the disadvantages of being under a composition scheme?
(a) You cannot sell outside the state/country or to SEZ area.
(b) You cannot avail any tax input credit.
(c) Instead of a tax invoice, you can only provide a 'bill of supply', and shall mention, “composition taxable person, not eligible to collect tax on supplies”.
(d) If your purchase is from an "unregistered person" then the tax needs to be paid by you.
(e) You can't claim ITC.
We at Metaphor Racha have not opted for the composition tax.