Composition scheme window open for six more months

Bid to bring more small taxpayers into easier compliance plan

The Goods and Services Tax (GST) Council has decided to keep open the composition scheme, an easier compliance and tax option, till March 31. The second window of the scheme closed on September 30. It allows small taxpayers to pay a fixed rate of turnover as tax and eases GST formalities.

“The opportunity to opt for composition scheme will be available till March 31, 2018,” Revenue Secretary Hasmukh Adhia told BusinessStandard.

The move will give entities more time to evaluate their business models to comply with the scheme requirements, enabling more assessees to avail of it. A notification moving the deadline to March is expected by early this week.

The Council, chaired by Finance Minister Arun Jaitley, had on Friday raised the eligibility threshold of annual turnover to ~1 crore from ~75 lakh for the composition scheme.

The scheme offers a flat rate of tax and allows quarterly filing of tax returns, instead of monthly filing. Under the scheme, traders pay the GST at 1 per cent, manufacturers at 2 per cent and restaurant owners at 5 per cent, but they are not allowed input tax credit. Small taxpayers up to ~1.5-lakh crore annual turnover have also been extended the option of paying taxes and filing returns every quarter.

Under the composition scheme, a dealer has to furnish one return, the GSTR-4, on a quarterly basis and an annual return, the GSTR-9A, as against three forms every month by a normal taxpayer. Besides, there is no requirement of invoice-wise details in their returns. Around 94-95 per cent of tax revenue comes from big taxpayers.

So far, 1.5 million registered entities have opted for the composition scheme — a sixth of the 8.9 million GST assesses.

“Given the feedback about SMEs (small and medium enterprises) struggling with GST compliances, the government wants to give an opportunity to a large number of small businesses. The fact that the window is open till March 2018 clearly demonstrates this,” said Pratik Jain of PwC India.

Rising awareness and solving registration-related challenges have led to a pick-up in the popularity of the scheme. About 540,000 taxpayers opted for it under the new window of about 14 days till September 30, compared to one million as of August 16, the earlier deadline.

A dealer opting for this scheme cannot issue a tax invoice. Hence, someone buying from such a dealer cannot claim input tax on the goods bought. Besides, one cannot do inter-state supplies in order to opt for the scheme.

The scheme is not available for manufacturers of tobacco and tobacco substitutes, pan masala and ice cream.