Composition scheme under GST for service providers

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At the time introduction of GST act, composition scheme was introduced was only for traders and manufactures and they could only few services only upto a certain limit of the turnover of their turnover which today is 10% or 5 lakh whichever is higher. There was no separate composition scheme for only service providers.

Vide notification no. 2/2019 – Central Tax (Rate) Dt. 07.03.2019, composition scheme was first introduced w.e.f. 01.04.2019 for service provider wherein GST needs to be paid at the rate of 6% of total turnover i.e. 3% CGST and 3% SGST and there cannot be IGST as service providers cannot make inter state supply.

Now Let’s read some other conditions/ important points related related to this notifications:

1. A persom whose turnover in preceding financial year should be 50 lakh or less can opt for this scheme.

2. This notification will cover those who are not eligible to pay tax under 10(1) i.e. trader and manufacturer under composition scheme.

3. This notification will cover those who are not engaged in making any supply which is not leviable to tax under the said Act (For eg: Petrol, alcohol).

4. A composition dealer cannot make inter state supply or cannot make supply through e-commerce operator who is required to collect TCS u/s 52.

5. A casual taxable person or non resident cannot register under composition scheme.

6. A person making supplies of the following items cannot opt for composition scheme: Ice cream and other edible ice, whether or not containing cocoa (2105 00 00), Pan masala (2106 90 20) and All goods, i.e. Tobacco and manufactured tobacco substitutes (24).

7. The composition rate shall apply to all units of such supplier even if they have acquired separate GST number.

8. The supplier shall not collect tax from recipient of its service, will not take ITC of input tax, will issue bill of supply instead of tax invoice and if he is required to pay tax under reverse charge u/s 9(3) or 9(4) he shall pay same at the rate of 6%.

9. The registered person shall mention the following words at the top of the bill of supply, namely: – ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.

In computing aggregate turnover in order to determine eligibility of a registered person to pay central tax at the rate of three percent under this notification, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.

To download the notification – CLICK HERE.

Circular 97/16/2019 clarifying rules can be downloaded from HERE.

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