Benefits of Composition Levy Under GST

| 1 year ago

In this article, we have tried to show all the possible advantages or benefit of getting GST Registration under composition Levy.

What is composition Levy under GST?

Basically, it’s a relaxation or AARAM (IN HINDI) provided by CBEC to the small taxpayers from the compliance of GST rules and regulation and many other things. As the economy of India depends on a lot of the success of such small taxpayers, they have been regarded as a backbone of our economy. Due to a complete change in taxation rules and regulation, such small taxpayers may face a huge burden of new compliances. In order to lessen the burden, the composite scheme has been launched. This type of scheme was previously available on various state VAT laws.

CBEC has given very strong eligibility criteria for Composition levy like a turnover limit of 75 lakh, service provider(other than restaurant services) and Interstate suppliers are not eligible etc.

Read: Composite Levy under GST


Benefits of getting GST registration under composition Levy?

benefits of composite scheme

Minimum Compliance with GST rules and regulation:

 A composite dealer is required to furnish quarterly return (GSTR-4) and one annual return (GSTR-9A) only. However, a normal supplier under GST is required to file 37 return annually. Also, he is not required to issue a TAX invoice to his recipient. Bill of supply will be used instead of tax invoice. The requirement of disclosure in a “Bill of supply” is very less as compared to “Tax Invoice”.

No need to maintain records:

A composite dealer is required to pay tax at a discounted rate on total turnover and he is not allowed to take input credit on purchases. Due to this, a composite dealer is not required to maintain purchase invoice and any other credit taking documents.

Lower tax rates

rate of gst under composite scheme

Due to lower GST rate under composite levy, a composite dealer is expected to earn more than the normal dealers. However, there are many contrary scenarios where a composite dealer makes less profit than a normal dealer like where the profit margin is very low like 10%.

Cash availability

Liquidity of a business is the most important growth factor in a long run. Composite levy requires a dealer to pay taxes on a quarterly basis, due to this, the taxes of 1st Month can be paid in the middle of the 4th month (return filling can be done up to 18th days from the end of a quarter). This is a big benefit for a composite dealer.



Also Read:

  1. Demerit of Composite Scheme
  2. How to Claim ITC under GST
  3. Reverse Charge Mechanism (RCM) Under GST

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