FAQ's on GST Composition Scheme

Published At: 10-Jul-2020

Q1) Can a dealer opt out of composition scheme ?

Yes, as per rule 6(3) a composition dealer can 'opt out' of the composition scheme at any time, by filing an application in Form GST CMP-04 on the GST Portal . 
It should be noted that, for 'opting in' the Composition Scheme, an application Form CMP-02 has to be filed on the GST portal prior to the commencement of the financial year for which the option to pay tax u/s 10(1) is to be opted.

Q2) Is composition scheme available for services also?

Yes as per Notification No.2/2019-CT(R) Composition scheme is available for service provider having turnover of upto Rs. 50L during previous FY.

Q3) Where the composition dealer has paid erroneously 5% tax instead of 1%, whether he can claim a refund and how?

File Refund application under the Category "Excess payment of Tax" on the GST portal as per Sec 54(1) read with Rule 89(2)(k). Also refer circular No. 125/2019 and 135/2020.

Q4) Can a composition dealer from Pune having its own website, accept orders through the website and make supply accordingly within the state of Maharashtra? As orders can be received from any where, can he supply if he receives order from state outside Maharashtra ?

Composition dealer can accept an order from his own Website and supply goods within Maharashtra. However if the supply is made through E-Commerce Operator where the consideration with respect to such supplies is to be collected by the Operator u/s 52 then the Composition Dealer is not allowed to make such supplies or will have to opt out of the Composition Scheme.
If Supply is made outside Maharashtra it will amount to Inter-state supply and Composition dealer cannot make inter-state outward supply of goods and services.

Q5) How will composition dealer pay tax on sale of second hand car?

Composition dealer supplying second hand car will pay tax @1% as per Rule 7 on value as determined by Sec 15 read with rule 32(5). Cess is not payable by a composition dealer as per proviso to Sec 8(1) of the GST Compensation to States Act.

Q6) How to opt out of the composition scheme if Dealer has not maintained rate wise/HSN wise stock details ?

The dealer can opt out of the Composition Scheme voluntarily by filing an application in Form GST CMP-04 on the GST Portal and filing Form GST ITC-01 for availing ITC of stock in respect of which invoice is available with the dealer as per Sec 18(1)(c). Further, as per Sec 18(2) credit can be claimed in respect of only those invoices that are issued within one prior to the date of opting out of the composition scheme.

Q7) Can a taxpayer opt in/out of the composition scheme during the year. Portal allows assesse to do so but as per rules is it permitted?

A GST registered person can opt in the composition only at the begining of the year by  electronically fililing an intimation in FORM GST CMP-02 as per Rule 3(3), duly signed or verified through electronic verification code, on the common portal i.e. He cannot switch into composition scheme in the middle of the year. However he can opt out at any time during the year by Filing an application in FORM GST CMP-04 on the GST Portal as per rule 6(3).

Q8) Whether the composition dealer is liable to pay tax on sale of used capital goods. If yes, at what rate, regular or composition rate ?

Yes, on the GST composition rates of 1%, 5% or 6% as applicable. The composition dealer is barred to collect tax separately.

Q9) If a person opted out of composition but failed to file ITC 01 within prescribed time, can he file the same belatedly and claim credit in respect of goods lying in stock ?

As per rules only if such due date is extended by the Commissioner by a notification in this behalf otherwise the dealer cannot file ITC-01 and the credit may lapse. However if the GST portal allows to file even after the due date one may try so.

Q10)If on 15th march turn over crossed the threshold limit, how to file Gst returns ?

For period 1st April to 14th March file - GST CMP-08 on quarterly basis and file GSTR-4 on annual basis on or before 30th April of next year or extented due date if any. For 15th March to 31st March file GSTR-3B and GSTR-1 on the GST common portal as per respective due dates. Further Annual return in form GSTR-9A for composition period and GSTR-9 for regular period will also be required to be filed as per Sec 44 read with rule 80.

Q11) A dealer switched out of composition to regular from 1-1-2018. But when the data was imported for 2A for 18-19 the system asked to file returns for the period from 1-1-2018 to 31-03-2018 as it is shows pending although the dealer has already submitted the return for this period as a regular taxpayer and when tried to file return for this period under composition, the portal shows a penalty of Rs 10000/- as payable.

The dealer will have to approach the GST nodal officer or GST helpdesk.

Q12) Dealer is registered in composition and his annual turnoverof sales of goods  is less than Rs. 30 lakhs . Is he liable to pay taxes on sales  in such cases, since threshold limit  for GST registration , in case of sales of goods is Rs. 40 lacs?

Yes, since the dealer is already registred under GST tax is [email protected] 1% and  all provisions of this Act, shall be applicable to such registered person.

Q13) If composition dealer engaged is providing services by way of  reparing work, what is the rate of tax for that reparing work receipt whether 1% or 6% ?

1. Tax shall be payable @6% as per Sec 10(2A) read with Notification No, 02/2019-CT(R) where the Composition dealer is eligible and has opted for the Composition Scheme applicable to service providers.
2. If such dealer has already opted for Composition scheme u/s 10(1) [Goods] then if turnover related to such reparing work is less than 10% of Total turnover for the year or Rs. 5L, the tax rate applicable shall be. In case reparinig work receipts are more than the above mentioned threshold dealer will become ineligibe for composition scheme u/s 10(1) and will have to supply goods/services/both as per regular scheme u/s 9(1).

Q14) Where a dealer has opted for Composition scheme  of goods, if any exempt goods are sold, then whether tax @1% payable on both taxable as well as exempted goods ?

As per Notf no. 03/2018- CT dt. 23.01.2018 w.e.f 01.01.2018 no tax is payable on exempt supplies by a compostion dealer u/s 10(1)(c). Also refer Rule 7.

Q15) For service provider opting for composition scheme,is he required to file ITC 03 as it's applicable only for stock? 

Yes, ITC-03 will be required to be filed as per Sec 18(4) read with rule 44(4). In case there is no stock of goods/capital goods as on the day immediately preceeding the date of opting in the composition scheme it advised to file Nil ITC-03.

Q16) Can outdoor catering service provider opt composition Scheme for F.Y. 2020-21?

Caterers can pay tax under Section 10(1)(b) of the CGST Act at rates prescribed but not exceeding 2.5% of the turnover in the state. The section does not specifically mention “restaurants or caterers” but lay down that persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II can avail the composition scheme.

Clause (b) of paragraph 6 of Schedule II reads “supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration”. The scope of this clause is wide enough to cover caterers.

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