Who is composition Supplier?
- A Composition supplier is a person registered under section 10 of CGST Act 2017
- Pays 1% GST on his total sales (Example if sales is Rs. 5,00,000, GST payable is Rs. 5,000 (being 1% of sales)
- Total sales by the supplier in a financial year should be less than Rs. 1.5 crore (If Trader or manufacturer) Rs. 75 Lakhs (If supplier is in North-eastern states and Himachal Pradesh) Rs. 50 lakh (if supplier is a service provider)
- Input tax credit in cash of composition scheme is not allowed
- Must mention composition taxable person on invoices
Note: If supplier is a Restaurant owner (not serving alcohol) than rate of GST is 5% instead of 1%
Benefits of Composition Scheme
- No burden of maintaining hectic business records, accounts or sale and purchase records
- Pay 1% of GST of total sales and be free of all compliance burdens or mismatched reports of GSTR 2A
- Pay taxes quarterly, no need to pay on monthly basis (However regular supplier can opt for QRMP Scheme and file return quarterly)
Disadvantages of Composition Scheme
- No benefit of Input tax credit
- Since no benefit of ITC, You are basically paying out of own pockets
- Even if the sales for the month are less than purchase still the GST will be paid
- No business through e-commerce portal
- No trading outside the state of registration (No interstate supplies)
- Not suitable for New Business which requires heavy investment in inventory
Should I opt for Composition Scheme?
Go for Composition Scheme if
- You don’t want to keep records of any kind, No invoices, no sales or purchase records
- You want to keep your tax liability limited
- No sales outside the state
Don’t go for Composition Scheme if
- You do not want to pay 1% of Tax out of pocket since GST cannot be collected from customer
- Business is a start up which requires heavy amount of investment in inventory.
- Goods are to be sold outside state (Interstate Supply)
- Turnover is more than Rs. 1.5 Crores
- Customer pays the GST
To know more about composition scheme Click Here
To register yourself visit GST Portal or contact us and we can get it done for you