GST: Composition Scheme

 

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: 

Type of Business	CGST	SGST	Total
Manufacturer and Trader	0.5 %	0.5%	1 %
Restaurants	2.5%	2.5%	5 %

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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GSTIN – Goods and Services Tax Identification Number

 

GSTIN – Goods and Services Tax Identification Number

GSTIN is a 15-digit unique identification number allotted to every registered taxpayer under the Goods and Services Tax (GST) system in India. It helps in identifying businesses and ensuring transparency in tax compliance.

Each GSTIN is structured as follows: Format Example: 29ABCDE1234F1Z5

Segment	Digits	Description
State Code	1–2	First two digits represent the state code (e.g., 27 for Maharashtra, 29 for Karnataka).
PAN Number	3–12	Next ten digits are the Permanent Account Number (PAN) of the taxpayer.
Entity Number	13	Thirteenth digit identifies the number of registrations on the same PAN in a state.
Default Alphabet	14	Usually 'Z', reserved for future use.
Check Code	15	Alphanumeric digit for error detection/validation.

Example Explanation: GSTIN: 29ABCDE1234F1Z5

• 29 – Karnataka (State Code)

• ABCDE1234F – PAN of the business 

• 1 – First registration of this PAN in Karnataka

• Z – Default value

• 5 – Checksum digit 

GST and Indian Railways

GST Rates on Indian Railways Related Goods and Services 

(as of March 28, 2025)

Category	Description	GST Rate
Passenger Transportation	Non AC - Sleeper Class & General Class	0%
Exempt Services	Platform tickets, retiring rooms, cloakrooms, battery car services, Transportation of Railway equipment or materials by Goods Train	0%
Passenger Transportation	First Class (Non AC) or AC coaches like 1st AC, 2nd AC, 3rd AC, and AC Chair Car.	5%
Goods Transportation	Transportation of goods by rail	5%
Food & Beverages	Supplied by Indian Railways/IRCTC/licensees on trains	5%  (No ITC)
Works Contract Services (Reduced)	Earthwork contracts >75% of value	12%
Works Contract Services (Standard)	Construction of under-bridges, tunnels etc.	18%

 

 

GST - Destination based consumption Tax जीएसटी - गंतव्य आधारित उपभोग कर

 

GST - Destination based consumption Tax

• GST - Goods & Services Tax operates as a Destination-based tax. 

• Destination-based tax means that the tax revenue is allocated to the location where the Goods & Services are ultimately consumed, rather than where they are produced. 

• Example: If a product is manufactured in Gujarat and sold to a consumer in Telangana, the GST revenue from that sale is attributed to Telangana State, not Gujarat State. 

• Imports: - GST is imposed on Imported goods on par with the domestically produced items to ensure a level playing field. 

• Exports: Zero rated under GST, meaning they are not subject to tax.  This approach enhances the competitiveness of Indian goods and services in the Global market. 

GST - Destination based Tax: Implications: 

1. Elimination of cascading taxes: By taxing at the point of consumption, GST reduces the cascading effect of taxes, where GST is levied on top of other taxes. 

2. States with higher consumption levels benefit from increased tax revenues, as GST is collected  in the State where Goods & Services are consumed. 

3. Shift in GST revenues from manufacturing heavy states to consumer heavy states

4. Unified National market by ensuring that Goods & Services are taxed uniformly, regardless of their origin.

5. Reduces trade barriers and fosters economic integration across States.

6. Incentivizes States to boost consumption within their territories to enhance Revenues

In summary, India's adoption of a destination-based GST framework ensures that tax revenues are aligned with consumption patterns, fostering a more balanced and equitable distribution of resources across the country.

जीएसटी - गंतव्य आधारित उपभोग कर

• जीएसटी - माल और सेवा कर एक गंतव्य-आधारित कर के रूप में कार्य करता है।

• गंतव्य-आधारित कर का अर्थ है कि कर राजस्व उस स्थान पर आवंटित किया जाता है जहाँ माल और सेवाओं का अंततः उपभोग किया जाता है, न कि जहाँ उनका उत्पादन किया जाता है।

• उदाहरण: यदि कोई उत्पाद गुजरात में निर्मित होता है और तेलंगाना में उपभोक्ता को बेचा जाता है, तो उस बिक्री से जीएसटी राजस्व तेलंगाना राज्य को दिया जाता है, गुजरात राज्य को नहीं।

• आयात: - समान अवसर सुनिश्चित करने के लिए आयातित वस्तुओं पर घरेलू रूप से उत्पादित वस्तुओं के बराबर जीएसटी लगाया जाता है।

• निर्यात: जीएसटी के तहत शून्य दर, जिसका अर्थ है कि वे कर के अधीन नहीं हैं। यह दृष्टिकोण वैश्विक बाजार में भारतीय वस्तुओं और सेवाओं की प्रतिस्पर्धात्मकता को बढ़ाता है।

जीएसटी - गंतव्य आधारित कर: निहितार्थ:

• कैस्केडिंग करों का उन्मूलन: उपभोग के बिंदु पर कर लगाकर, जीएसटी करों के कैस्केडिंग प्रभाव को कम करता है, जहां जीएसटी अन्य करों के ऊपर लगाया जाता है।

• उच्च उपभोग स्तर वाले राज्यों को कर राजस्व में वृद्धि से लाभ होता है, क्योंकि जीएसटी उस राज्य में एकत्र किया जाता है जहाँ वस्तुओं और सेवाओं का उपभोग किया जाता है।

• जीएसटी राजस्व में विनिर्माण प्रधान राज्यों से उपभोक्ता प्रधान राज्यों में बदलाव

• यह सुनिश्चित करके एकीकृत राष्ट्रीय बाजार कि वस्तुओं और सेवाओं पर उनके मूल की परवाह किए बिना समान रूप से कर लगाया जाता है।

• व्यापार बाधाओं को कम करता है और राज्यों में आर्थिक एकीकरण को बढ़ावा देता है।

• राजस्व बढ़ाने के लिए राज्यों को अपने क्षेत्रों में खपत बढ़ाने के लिए प्रोत्साहित करता है

संक्षेप में, भारत द्वारा गंतव्य-आधारित जीएसटी ढांचे को अपनाने से यह सुनिश्चित होता है कि कर राजस्व उपभोग पैटर्न के अनुरूप हो, जिससे देश भर में संसाधनों का अधिक संतुलित और न्यायसंगत वितरण हो।

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