Firms under GST composition scheme to soon start filing returns
New Delhi: Businesses which opted for composition scheme in the July-September quarter will get to file their maiden goods and services tax (GST) returns soon. Around 15 lakh businesses opted for composition scheme, which allows them to pay taxes at a concessional rate and makes compliance easy, till September under GST that rolled out from 1 July.
“We are ready with GSTR-4 which will be used by composition scheme businesses for filing returns. The utility will be available on GSTN portal soon,” GST Network CEO Prakash Kumar told PTI. As per GST laws, for July-September quarter businesses, with turnover of up to Rs75 lakh, opting for composition scheme can file quarterly returns and pay taxes.
The scheme is optional under which manufacturers other than those of ice cream, pan masala and tobacco products have to pay a 2% tax on their annual turnover. The tax rate is 5% for restaurant services and 1% for traders. There are over one crore registered businesses under GST, which has amalgamated over a dozen taxes to make India a single market for seamless flow of goods and services.
The GST Council had earlier this month raised the turnover threshold from Rs75 lakh to Rs1 crore for businesses to opt for the scheme. Hence, those with turnover of up to Rs1 crore can take advantage of composition scheme beginning 1 October. Also, a group of state finance ministers have been set up to make the scheme more attractive. The objective behind the composition scheme is to bring simplicity and reduce the compliance cost for small taxpayers.
As per the Central GST Act, businesses are eligible to opt for the composition scheme if a person is not engaged in any inter-state outward supplies of goods and not into making any supply of goods through an electronic commerce operator who is required to collect tax at source. While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis. Also, a composition taxpayer is not required to keep detailed records that a normal taxpayer is supposed to maintain.
The group of ministers (GoM) headed by Assam finance minister Himanta Biswa Sarma also suggested doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under composition scheme, and tax them at 12%. It also suggested that hotels which has room tariff of more than Rs7,500 should attract 18% tax rate.
With regard to traders, the GoM suggested two pronged approach for taxation under the scheme. It suggested that traders who want to exclude the sale proceeds of tax-free items from its turnover, it can pay 1% GST. However, those traders who pay tax on total turnover, the tax rate has been proposed at 0.5%. For example, supposing a trader deals in goods which are tax exempt as well as those which are taxable under the GST and has a turnover of Rs1 crore. Of this, Rs40 lakh turnover is from sale of tax-exempt items and remaining Rs60 lakh from taxable goods. “The GoM decided that tax rates under composition scheme for restaurants and manufacturers be lowered to 1%. For traders, the ministerial group suggested two tax rates,” an official told PTI.
The GoM also recommended allowing businesses who are engaged in inter-state sale to avail the composition scheme, the official quoted above added.
Around 15 lakh businesses opted for composition scheme, which allows them to pay taxes at a concessional rate and makes compliance easy, under the goods and services tax (GST) which rolled out from 1 July. There are over 1 crore businesses registered under GST. While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis. Also, a composition taxpayer is not required to keep detailed records that a normal taxpayer is supposed to maintain.
The GoM was set up earlier this month and was tasked with revisiting the tax structure of different categories of restaurants with the aim of rationalising or reducing the rates, apart from making composition scheme more attractive for businesses. Currently, GST is levied at 12% on non-AC restaurants, while it is 18% for air-conditioned ones.
The other members of the GoM are Bihar deputy chief minister Sushil Modi, Jammu and Kashmir finance minister Haseeb Drabu, Punjab finance minister Manpreet Singh Badal and Chhattisgarh minister of commercial taxes Amar Agrawal. The GoM has also suggested that manufacturers engaged in job works can be allowed to opt for composition scheme, the official added.