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.
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.
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.