What is the GST composition scheme?
The GST composition scheme is a benefit offered to small businesses. According to this scheme, it offers relaxation regarding the payments for businesses that have a certain turnover within the scheme limitations. This scheme is a great way to enhance the fluidity of a business. The scheme is profitable for small businesses such as Kirana store, repair shops, etc. or Business to Business ventures as well as Business to Consumers ventures. To learn how it affects your specific business whether it is a Kirana or a hardware store visit here
The scheme mainly has two benefits- tax liability is lower and reduced compliance as well as paperwork. The number of GST filings reduces. The person who has applied for the GST composition scheme has to file for GST only twice- a quarterly filing and an annual filing as compared to those who have not applied for the GST composition scheme and pay three monthly GST filing along with an annual filing.
What are the pros and cons of the GST composition scheme?
Every scheme has both sides attached to it. It may be a boon for one and a bane for another. Here are the pros and cons of the scheme-
- The scheme allows the taxpayer to have some relaxation by reducing the liability.
- Businesses can have a better cash flow system in their organisation due to lower tax liability. It will also help the organization run smoothly.
- Taxpayers can now relax in terms of filing returns and maintaining records every now and then as the scheme allows the lesser number of GST returns filing.
- Taxpayers will not be able to recover composition tax from their consumers since they are not allowed to issue a tax invoice under the scheme.
- The B2B business owners as well as the buyers of the goods will not be able to collect input tax. It will result in a gap in market prices. The buyer who is not registered under the scheme and buys goods from the individual who is registered under the scheme will not be getting any credit and it will lead him to losses.
- The reach of the business registered under the scheme gets limited. The person would not be able to do interstate business.
Which services can avail of the GST composition scheme?
There is a certain limit regarding the turnover of a business and only those vendors can apply for the GST composition scheme which falls under the limit. For instance, a retail hardware shop that has a turnover of less than 1.50 crore can apply for the scheme, want to know how? Click here. Here is a list of few vendors or small businesses that can avail of the scheme-
- Food service unit
- Trade or manufacturing unit
- Service sector unit
- Machine operator
- Small manufacturing unit
- Fruits and vegetable vendors
- Truck operators
The scheme is great for small businesses and simplifies the whole tax process for the vendors. It allows them to work and function smoothly without worrying about filing GST returns so many times. Anyone can visit the government portal of the GST and apply for the scheme online.