Table of Contents
Introduction:
Composition scheme under GST law is for small businesses. The traditional scope of the Composition Scheme, initially designed for businesses dealing predominantly in goods, has undergone a transformation. Recent amendments by the GST Council now welcome service providers into its fold, expanding the reach and impact of this simplified tax regime. This is to bring relief to small service provider, so that they need not be burdened with the compliance provisions under the law.
Section 1: Eligibility Criteria for Service Providers to apply for Composition scheme under GST
An option has been provided to the eligible service provider, under composition scheme for service providers under GST, who can opt to pay a fixed percentage of tax on the basis of turnover. In order to determine the eligibility of the service provider eligible for the composition scheme, service provider has to full fill the following conditions.
- The supplier of service should not cross the turnover limit of Rs. 50 lakh in the previous financial year.
- If a service provider’s turnover exceeds Rs. 50 lakhs during a year, he has to shift to the normal scheme and pay tax at regular rates.
- The supplier should not be a casual taxable person or non-resident taxable person
- The Service provider should avoid the e-commerce activities
- The Service provider should not be engaged in making inter-state supplies.
- The service provider should not be engaged in making inter-state supplies.
- The service provider must mention the words ‘composition taxable person’ on the bill of supply.
- The service provider cannot claim the input tax credit
- The service provider cannot charge and collect tax from the customer
- The service provider must pay normal tax for reverse charge supplies
Section 2: Rate of Tax under Composition Scheme for Service Providers under GST
Composition service providers are required to pay tax at the rate of 6% ( CGST 3% and SGST 3% ) for the value of taxable service provided. Supplier has to pay this tax from his own pocket and cannot charge from customers.
Section 3: Opting into the Composition Scheme for Service Providers under GST
The process for service providers to opt into the Composition Scheme involves filing the GST CMP-02 form. This filing must occur before the commencement of the financial year in which they wish to join the scheme. Once opted in, service providers can enjoy the benefits for that financial year and subsequent years until they choose to exit or no longer meet eligibility criteria.
Section 4: Advantages of Composition Scheme for Service Provider under GST
- Simplified Compliance – The Composition Scheme’s reduced compliance burden is especially advantageous for service providers, aligning with the unique operational characteristics of their businesses.
- Fixed Tax Rate – The fixed tax rate at 6% ( CGST 3% and SGST 3% ) provides service providers with budgetary certainty, simplifying financial planning and ensuring a steady tax outflow.
- Exclusion from ITC and Business Activity Limitations – ervice providers should carefully consider the trade-off between the benefits of the Composition Scheme and the limitations it imposes, including the inability to claim ITC and restrictions on certain business activities.
Section 5: What is the GST Returns to Be File by Composition Scheme for Service Providers under GST?
Persons registered under the composition scheme for service providers under GST scheme are required to file CMP-08 for each quarter and GSTR-4 for every financial year
Conclusion:
In adopting the Composition Scheme for service providers under GST, contribute to the broader objective of fostering ease of doing business in India. By offering a simplified tax mechanism, service-oriented enterprises can now navigate the complexities of GST with greater ease, focusing on growth and compliance simultaneously. Composition scheme is available for service providers under GST , with turnover of up to Rs. 50 lakh in the previous financial year. Service providers who have opted for composition scheme for service providers under GST are required to pay composition fees at rate of 6%. It is beneficial for service providers who generally provide services directly to consumers.
Disclaimer: The content and views stated in this article is solely for informational purpose only
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