Comparison Of Regular Scheme and Composition Scheme Under GST

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Author: Kritika Godhia

Date: 16 Sep 2022


Differences Between Regular And Composite Schemes

For small and medium-sized businesses, the GST composition plan is suitable. With the help of this program, a company with annual sales of less than Rs. 1.5 crore can pay GST at a predetermined rate. For the North-Eastern states and Himachal Pradesh, the ceiling is set at Rs. 75 lakh.

Why Was The Composition Scheme Introduced?

The composition scheme was essentially introduced for the convenience of small traders. The conventional method in a way that it provides lesser tax rates and higher liquidity to small traders. Under GST or taxpayers, the composition scheme is a straightforward and uncomplicated plan. The composition scheme was introduced so that small taxpayer could get rid of tedious GST formalities and pay GST at a fixed turnover rate. 

What Is the Difference Between Regular GST Scheme and Composite GST Scheme?

Below is a table comparing the two of them to highlight the differences.

 

Particulars

Regular GST Scheme

Composite GST Scheme

Meaning

The standard GST plan is a typical method of paying the output tax. The applicable Input Tax Credit is also taken into account.

For all small taxpayers, the composite GST plan is a simple system. Under this, they can pay GST at a fixed rate and avoid complicated GST compliance.  

Filing Of Returns

The following returns are to be filed: 

  • Annual Return: Form GSTR-9 or GSTR-9C

  • Monthly Basis: GSTR 3B

  • Monthly or Quarterly Basis: GSTR-1

The following returns are to be filed: 

  • Annual Return: Form GSTR 4 yearly as decided in the 32nd council meeting.

  • Monthly Basis: Form GST-9A for Annual Return

  • Statement of tax paid on Quarterly Basis: Form CMP-08

Supply

Supply can be made interstate and intrastate under the standard GST. scheme.

The supply can only be made within an intra-state under the composite GST.

Tax Collection

Tax can be collected at the set rates under the standard GST scheme.

The composite GST Scheme forbids the collecting of taxes.

Supply Services

The cap is Rs. the particulars of the service determine 20 lakhs, and the tax rate applied.

Rs. 50 Lakh is the limit, and 6% is the tax rate applicable on the turnover.

Not Eligible To Opt For The Scheme

There are no exceptions.

 

The following cannot opt for the scheme: 

  • The person crying interstate supplies

  • Supplier of non-taxable goods

  • Supply of goods via e-commerce portal.

  • Producer of ice cream, tobacco, or pan masala

  • Businesses whose turnover exceeds the prescribed limits.

Specified Condition Of Scheme

No firm using the same PAN can be registered under the composition system once the taxable person has registered under the standard GST scheme.

Below are the specific conditions: 

  • No dealer under this scheme can claim the input tax credit. 

  • The dealer cannot supply GST-exempted goods

  • The dealer can supply services to 10% of the turnover or Rs. 5 Lakh or whichever is higher.

  • The taxpayer under this plan must state on each bill, notice, and signboard at their place of business that they are a taxable person and are not allowed to collect taxes.

  • Tax should be paid at the normal tax rates under the reverse charge mechanism. 

  • If a PAN name is used for more than one type of business, they must register them all under this programme or choose not to participate.

What To Issue

Tax Invoice

Bills Of Supply

GST Payment 

The GST is payable as: 

  • Output GST - Input GST+Tax on Reverse Charge.

The GST is payable out of pocket for the supplies as: 

  • GST on supplies made+Tax on reverse charge

Merits

The following are the merits of a regular GST scheme:

  • It has an unlimited territory of business.

  • Availability of credit of input tax paid.

  • It can sell via an e-commerce portal.

The following are the merits of a composite GST scheme:

  • It has less compliance

  • It just has a small tax obligation.

  • It does not require keeping ledgers.

  • Because the taxes are paid at a reduced rate, there is a lot of liquidity.

Demerits

Following are the demerits of the regular GST Scheme:

  • It has more compliance than composite GST, i.e., several returns are to be filed.

  • Less liquidity prevents huge tax amounts in e-ledgers; one can only access input when the provider has submitted the return.

  • Detailed accounting records must be kept.  

Following are the demerits of the composite GST Scheme:

  • It has limited territory business as it does not allow interstate transactions. 

  • No input tax credit is available to dealers.

  • The taxpayers are not eligible for the supply of exempted goods or goods via the e-commerce website.

Restriction on SEZ

There is no restriction on export or supply to SEZ or SEZ developers. 

A person who cannot make any supplies for SEZ or its developers.

Condition To Opt-Out

Any person can opt out of the regular GST scheme at any time.

In the composite GST scheme, if the taxpayer's turnover is below Rs. 1.5 Crore (in the case of the North Eastern States and Himachal Pradesh is Rs.75 Lakhs), can opt out at the beginning of the financial year

 

Conclusion 

Now you know the difference between regular GST and composite GST, it will be easier to comply with it. The composition scheme has small business owners reduce their tax liabilities while making GST compliance easier. In contrast, the composition scheme offers many benefits to small businesses.


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