Composition Scheme in GST
Simplified compliance scheme for small taxpayers
Eligibility:
Applicable to Businesses with annual turnover up to Rs. 1.5 Crores (Rs. 75 Lakhs for NE - North Eastern States)
Can be opted voluntarily at the time of GST registration or beginning of the Financial Year.
Features:
Fixed low tax rate on Turnover.
Reduced compliance burden i.e., Quarterly returns instead of monthly.
No ITC - Input Tax Credit is allowed.
Service providers are not eligible. However, restaurants are eligible.
GST Rates under Composition Scheme:
Ineligible Categories:
Service providers (except restaurants)
Manufacturers of ice cream, pan masala, or tobacco
Dealers making inter-state supply
Suppliers through e-commerce operators
Advantages:
Lower tax rate (1% or 5%)
Easier compliance — less paperwork and filing
Higher liquidity due to limited tax liability
Disadvantages:
No inter-state sales allowed
No input tax credit (ITC) eligibility
Cannot deal in exempted goods or online platforms (e-commerce)
Indian Railways & Composition Scheme:
Indian Railways invites participation from vendors, canteens, and contractors for supply of goods/services.
Vendors or contractors registered under the Composition Scheme must keep in mind the restrictions:
Cannot supply inter-state, while railways have zonal and pan-India operations.
Cannot issue tax invoices with ITC, which may be required by the Railway Accounts Department.
For railway contractors, input tax credit ineligible under Composition Scheme may raise cost of operations.
Railway Procurement Consideration:
In tenders, preference is often given to regular GST registered suppliers who can pass ITC benefits to Indian Railways.
Railways may not accept suppliers under composition schemes for certain categories where inter-state or exempt goods are involved.
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