Composition Scheme Current Affairs

GST council constitutes GoM to review GST Composition Scheme

The GST Council has constituted a Group of Ministers (GoM) to make the composition scheme more attractive and revisit the goods and services tax rates on restaurants. It will be headed by Assam Finance Minister Himanta Biswa Sarma and submit its report in two weeks.

Committee’s role

It will examine steps to make it more attractive as only 15.50 lakh businesses out of total 98 lakh have registered under GST regime opting for composition scheme. Businesses with turnover of up to Rs. 1 crore can opt for composition scheme and pay taxes in range of 1-5% and file returns quarterly.

It will look into whether turnover of exempted goods can be excluded from total turnover threshold for levying tax under scheme. It will examine whether scheme can be extended to taxpayers dealing in inter-state supplies of goods and whether the manufacturers opting for it can be given the benefit of input tax credit.

It is also been tasked to revisit tax structure of different categories of restaurants in order to rationalise or reduce rates. Currently, GST is levied at 12% on non-AC restaurants and 18% on air-conditioned ones. It will examine whether AC restaurants pass on benefit of cost reduction under GST to consumers and if they don’t, whether they be disallowed input tax credit claims.

Composition scheme

It is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs 75 lakh (Rs 50 lakh in case of 8 north-eastern states and hilly state of Himachal Pradesh). Its objective is to bring simplicity and reduce compliance cost for small taxpayers. It is optional under which manufacturers other than those of pan masala, tobacco and ice cream products have to pay 2% tax on their annual turnover. The tax rate is 5% for restaurant services and 1% for traders.

As per Central GST Act, businesses are eligible to opt for composition scheme if person is not engaged in any inter-state outward supplies of goods and not into making any supply of goods through e-commerce operator who is required to collect tax at source.

While regular taxpayer has to pay taxes on monthly basis, composition supplier is required to file only one return and pay taxes on a quarterly basis. Composition taxpayer is not required to keep detailed records that normal taxpayer is supposed to maintain.

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GSTN reopens composition scheme window for small traders

The GST Network (GSTN) has reopened composition scheme window facility for small taxpayers with turnover of up to Rs.75 lakh to opt for composition scheme, which offers easy compliance for business as returns are to be filed only quarterly. The window will be open for those taxpayers who have migrated from earlier excise, service tax or VAT regime as well as for the newly registered taxpayers.

Earlier, small taxpayers were given time deadline of August 2017 to opt for composition scheme. But, only 10.86 lakh taxpayers, out of total 85 lakh registered businesses had opted for the scheme.

Background

The GST Council headed by Union Finance Ministry had decided to reopen window for allowing taxpayers to opt for scheme. Taxpayers who will opt for the composition scheme during the period will be given the facility from 1 October 2017. These taxpayers will be treated as normal taxpayer and will have to file monthly return.

About Goods and Services Tax Network (GSTN)

GSTN is a not for profit, non-Government, private limited company incorporated in 2013. The Union Government holds 24.5% equity in GSTN. It has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of Goods and Services Tax (GST).

All States including two UTs (Delhi and Puducherry) and the Empowered Committee of State Finance Ministers (EC) together hold another 24.5%. Balance 51% equity is with non-Government financial institutions-HDFC Bank Ltd (10%), HDFC Ltd (10%), ICICI Bank Ltd (10%), NSE Strategic Investment Corporation Ltd (10%) and LIC Housing Finance Limited (11%).

The Revenue Model of GSTN after GST rollout will consist of User Charge to be paid by stakeholders who will use the system and thus it will be a self-sustaining organization.

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