Composition-Scheme-for-Service-Providers

Composition Scheme for Service Providers 2020-21

Composition Scheme for Service Providers 2020-21

Due to the impact of Corona Virus, the lives of the people became highly unstable and the Governments across the globe struggles to lift back the manufacturing and industrial sector. The impact of the devastation forced Governments to lockdown their countries wholly or partially. To create a stable economic platform, the Government of India slashed and waived all the penalties and postponed to pay taxes for people. As a result, many taxpayers unable to register or avail schemes due to lockdown of all central and state departments. However, the GoI extended time period for filing taxes and to avail schemes. As such, through the Notification No. 30/2020, the Central Board of Indirect Taxes and Customs implemented Central Goods and Services Tax (Fourth Amendment) Rules, 2020. In the Fourth Amendment, the CBIC notified that the taxpayer liable to taxes for the Composition Scheme for the year 2020-21, the taxpayer may choose to file the taxes by:

Sending an intimation in Form GST CMP-02, signed and verified through an electronic code through the GST Portal and furnish the statement in Form GST ITC-03 as per rule 44 on or before 31st July 2020 or

The taxpayer may also choose to file directly through a Facilitation Centre as notified by the Commissioner on or before 30th June 2020.

Existing taxpayers for Composition Scheme, should not file in GSTR-1 or GSTR-3B for the tax period of 2020-21. Filing in GSTR-1 or GSTR-3B shall be considered as not registered for the Composition Scheme. To continue with the Composition Scheme, the taxpayer need not re-opt to avail the Composition Scheme as it avails automatically.

Note: This shall apply only during the lockdown period. After the ban of the lockdown period, the below-mentioned procedures shall apply.

For more details on the notification, Scroll down:

Composition-Scheme-for-Service-Providers-2020

In order to come up with various solutions, the Goods and Service Tax Council meets up frequently and comes up with various decisions. The 32nd Goods and Service Tax Council meeting was held on 10th January 2019, wherein, the various major decision was taken. One such decision was eligibility/availability of composition scheme for service providers and mixed suppliers which were earlier not available. In order to implement the said decision of Goods and Service Tax Council, the Central Board of Indirect Taxes and Customs have issued a notification no. 2/2019-Central Tax (Rate) dated 7th March 2019 and the same is taken up in the present article.

Coverage of Supplies

The registered person supplying goods or services or both up to an aggregate turnover of INR 50 Lakhs.

Rate of Tax –

6% (3% CGST + 3% SGST)

Condition for Availment of Composition Scheme –

  1. Aggregate turnover of the supplier should be INR 50 Lakhs or less in the preceding financial year.
  2. The supplier should not be eligible to pay tax under section 10 (1) of the Act.
  3. The supplier should not be engaged in making supply which is not leviable to tax.
  4. The supplier should not be engaged in making any inter-state supply.
  5. The supplier should not be a casual taxable person.
  6. The supplier should not be a non-resident taxable person.
  7. The supplier should not be engaged in making supplies through an e-commerce operator who is required to collect tax u/s 52.
  8. The supplier should not be engaged in making supplies of following
Sr. No. Tariff Description
1 2105 00 00 Ice cream and other edible ice, whether or not containing cocoa
2 2106 90 20 Pan masala
3 24 All goods i.e. tobacco and manufactured tobacco substitutes

Other Important Conditions

  1. The supplier cannot collect any tax from the recipient of supplies.
  2. The supplier cannot avail input tax credit of tax so paid.
  3. The supplier, instead of a tax invoice, is required to issue a bill of supply. The supplier is also required to mention ‘taxable person paying tax in terms of notification no. 02/2019- Central Tax (Rate) dated 7thMarch, 2019, not eligible to collect tax on supplies’.
  4. The supplier opting to pay tax availing benefit of this notification is liable to pay tax under reverse charge basis on inward supplies at applicable rates.

It is important to note that the above notification no. 02/2019-Central Tax (Rate) dated 7th March 2019 would be effective from 1st April 2019.

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