Composition scheme helps to ease the burden of GST compliance for small taxpayers. Those who are eligible for the scheme must maintain fewer records and file GST returns on a quarterly basis instead of monthly. Earlier, composition scheme was only available to the suplliers of goods, however, in the 32nd GST Council Meeting it was decided that servic eproviders can also opt for composition scheme.
A taxpayer who has an annual turnover of Rs 50 lakhs or less can opt for the service provider scheme. This scheme is applicable to service providers, as well as suppliers of goods and services who were previously ineligible for the composition scheme.
The process for a service provider to register for the composition scheme is the same as that for an existing composition taxpayer. However, if a service provider chooses to pay the composition levy, they must check S.No.5 (iii) in CMP-02 (“any other supplier eligible for composition levy”). Other than that, they need to provide the same information as other composition dealers.
Service providers are subject to a GST rate of 6%. However, the value of the supply of exempt services, such as extending deposits, loans, or advances where the income is represented by interest or discount, will not be included in the calculation of the aggregate annual turnover.
|Particulars||Regular Taxpayer(Tax at 18%)||Composite taxpayer(Tax at 6%)|
|Sales value with tax||1,41,600||1,41,600|
|Taxable value (In the composition scheme, tax cannot be collectedseparately)||1,20,000||1,41,600|
|GST tax liability||21,600||8,496(1,41,600 x 6%)|
|Purchase inward supply||50,000||50,000|
|Input GST Credit at 18%||9,000||9,000|
|Total Purchase Value||59,000||59,000|
|Net GST Payable||12,600 (21,600 – 9,000)||8,496|
|Gross Profit||70,000 (1,20,000 – 50,000)||74,104 (1,41,600-59,000 – 8,496)|
The composition scheme for service providers is an initiative by the GST Council to ease the burden of compliance for small taxpayers. Under this scheme, service providers with an annual turnover of Rs 50 lakhs or less can opt for the composition levy, which is subject to a GST rate of 6%. This allows them to maintain fewer records and file GST Returns on a quarterly basis instead of monthly. With the recent decision to expand the scope of the scheme to include service providers, more businesses can benefit from this tax system. Overall, the composition scheme for service providers is a step towards a more streamlined and efficient GST framework, making it easier for small businesses to navigate the complex tax landscape.