Composition Scheme after Amendment(Supplying Goods as well as Service

[Prem Choudhary]

Dear Exper

We have heard that amended in Composition scheme for availing scheme for both supplier -goods or Services or both supplier.

However we have not find condition for availing scheme if supplier has supplier both goods and services.

please advice..

[KASTURI SETHI]

Notification No. 02/2019-Central Tax New Delhi, the 29th January, 2019. Also see Section 5 of the CGST (Amendment )Act, 2018 (31 of 2018 effective from 1.2.2019

 

 

[Rajagopalan Ranganathan]

Sir,

According to Section 10 (1) of CGST Act, 2017 "notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, [in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate] as may be prescribed, but not exceeding, -

(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers,

subject to such conditions and restrictions as may be prescribed :

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding [one crore and fifty lakh rupees], as may be recommended by the Council.

[Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.]"

In view of this provision if a supplier makes supply of both goods and services under composition scheme, he can make supply of service upto 10% of the turnover (of what turnover of goods or turnover of both goods and services-not clear from the wordings employed by the legislature) during previous financial year. As the things stand as of noe the turnover is of both goods and services.

[Prem Choudhary]

Sir

In our case , previous year total turnover is less then 1.5 crores and includes ₹ 10 lacs supply of services.

Pls advice we can opt composition scheme w.e.f 01.04.2019

[KASTURI SETHI]

In my view, 10% is of turnover of goods. You can opt for Composition Scheme but practically there is a huge loss to the assessee. You will lose ITC and will pay tax from your pocket. It is double loss. Regular GST scheme is more beneficial for any assessee.

[Ganeshan Kalyani]

Rightly said by Sri Kasturi Sir, in composition scheme, the taxes paid on the purchases are not creditable. Secondly , a percentage of tax on the turnover is required to be paid by the person. So, tax paid at two instances. Had the registration taken in regular scheme then the tax paid would be net of the input tax credit. However, the Govt. has come up with this scheme for those who does not want to maintain books of accounts with input tax in separate general ledger account and compute tax by appointing an tax accountant. In small businesses the accountants are on visiting terms. they would visit once in a month and enter all the sales , purchase transaction in the books. If there is no credit is to be taken then no need to work out taxable amount and tax amount separately. in case credit is taken bills are to be preserved properly. The composition scheme eliminates all the requirement. It reduces the cost of compliance. Further, GSTR-2A reconciliation is also not required to these person. Lot of headache is gone in matching the purchase shown in books vs sales uploaded by the vendor. Going ahead the buyer has to call the vendor and ask him to show the sales in GSTR-1 in B2B with proper GSTIN. The call centre type of work will increase in the business. Also, to claim credit the vendors needs to be withing 180 days. The payment tracking is also important to justify claims. Hence, the composition scheme is lucrative. Otherwise as said by collegue expert composition scheme is not beneficial.

[Prem Choudhary]

Sir

Dealer is going to discontinue supply of Services and only supply of goods in future. We have confusion in condition related to to amendment that the "value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.”;

In the above case , in previous year Total Turnover is 1.30 lacs and its include ₹ 10 lacs for supply of Services.

1. Whether 5 lacs is maximum Cap of opting Composition ?

2 In our case 10% of 1.30 Crores=13 lacs or 5 lacs ,higher is ₹ 13 lacs but actual turnover is 10 Lacs we can opt composition Scheme, Is it True ?

3 If in our case Service of Supply is ₹ 14 lacs answer will be change?

[KASTURI SETHI]

Dear Querist,

Query-wise reply is as under:-

1. 5 lakhs is minimum cap.

2. Yes you can opt for composition.

3. Answer will change. You cannot provide service more than 10% of turnover of previous year under composition scheme. Any deviation will invite SCN for differential tax, interest and penalty. You may face other legal consequences also.

[Prem Choudhary]

Sir

I didn't get logic of 5 lacs in Conditions., requesting to elaborate logic behind it.

In simple language ,amounting to ₹ 5 Lacs in condition is maximum limit of Service value in previous year for opting Composition Scheme.

[Prem Choudhary]

Thank you so much for clarifying amendment of Composition Scheme.

One more Clarity is require for followings:-

Case- if dealers are supplying of goods, running canteen and providing service of courier in previous year.

Query:-

1. What are the rate applicable in case dealer want to opt Composition from 1.4.2019 ? whether Separate rate is applicable for canteen (5%) ? or single rate of entire turnover (1% ).

2 Sec-10(1)''For complying of Condition of up to 10% of total turnover or 5 Lacs'', Canteen supply is also consider as Service or excluding Canteen ?

[KASTURI SETHI]

For mixed supplies under composition it is 6 % (CGST 3%+SGST 3%)

[SHARAD ANADA]

Logic behind ₹ 5 Lakh is, suppose you have started business in the year 18-19 and do not have any turnover in previous year. In that case if condition of 10% of T.O. of preceding FY will be Nil. Here condition is Value Exceeding 10% of T.O. in state or UT in the preceding FY or ₹ 5 Lakh whichever is Higher. So in first year it self you can avail composition scheme if your supply of service is up to 5 lakh in your total T.O.

[Prem Choudhary]

Thnak you, please also light on rate of tax applicable in case of supplier has "business of sale of goods as well as catering services"

AI Summary

Composition scheme eligibility: service value limited relative to prior turnover or a minimum floor, affecting tax and ITC consequences. Amendments permit composition registration for taxpayers with turnover below the prescribed threshold, but impose a limit on supplies of services by composition taxpayers: service value in the preceding year must not exceed the higher of a percentage of prior-year turnover or a monetary floor. Exceeding that service-value limit risks assessment for differential tax, interest and penalty. The scheme eliminates input tax credit for composition dealers and simplifies compliance, but may be financially disadvantageous for mixed suppliers such as those combining goods sales with catering or courier services.