Goods and Services Tax – GST – By: – CA.Tarun Agarwalla – Dated:- 25-1-2017 Last Replied Date:- 25-1-2017 – Composition scheme under Model GST Law, its impact on industry A. Introduction: 1. The New Model GST Law ( henceforth MGL ) as made available in the public domain as on 26th November 2016 have brought out many changes with respect to the provisions with respect to composition levy. Composition Levy has been present in indirect taxes to address the small business units or specific business units having complexity in the valuation of taxable amount.MGL section 9 talks about payment of taxes in lieu of normal tax liability under section 8 of MGL, talks about Levy in general. Composition scheme also brings a lesser compliance requirements, however, composition scheme normally successful in B to C segment rather than B to B segment. 2. At present almost all the state VAT laws normally have provisions for taxpayers to opt for composition scheme. Broadly two type of taxpayers is having
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n levy facility is to be used on all India PAN basis. It means all the registration across India belongs to the same PAN must avail the scheme. e) Once on a particular day, the aggregate turnover exceeds ₹ 50 lakhs, the scheme deemed to be withdrawn from such date. f) If the proper officer has reasons to believe that a taxable person was not eligible for the scheme, the taxable person shall pay tax under normal provisions and penalty. 5. Restriction for the scheme: – under the provision of section 9(1) of MGL, Composition semen could not be allowed in the following class of taxable persons:- a) who is engaged in the supply of services, or b) who makes any supply of goods which are not liveable to tax under this Act, or c) who makes any inter-State outward supplies of goods; or d) who makes any supply of goods through an electronic commerce operator who is required to collect tax at source under section 56; or e) Who is a manufacturer of such goods is as may be notified on the rec
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garded as services and not goods. In this respect the following issues may found relevant:- a) The transitional provisions section 172 may be used fully for such cases where a composition dealer may not be eligible under MGL. b) Works contractor normally be under composition scheme of Sate VAT and service tax normally be paid under abatement forging the CENVAT on inputs. In this case the Cenvat Credit on stocks, semi fished and finished stocks may not be available under section 172 of MGL. However, section 169 related to the general availability of credit may come for rescue. However, it is the subject matter of further analysis. 9. What would be regarded as composition scheme under earlier law gave not been provided in the MGL. For instance, there are cases in excise where the special rate of duty has been allowed without taking any CENVAT credit. In the MGL it is given that, Persons Manufacturing, specified items may not opt for composition scheme. Hence in such cases, whether sectio
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ns made or agreed to be made by such person in the course or furtherance of business. 11. Impact on decisions in GST a) As the small dealers in the majority of states are operating with the existing turnover limit of ₹ 50 lakhs. The impact may not be much. However, the majority of them may not cover due to the enhancement of taxable limit of ₹ 20 lakhs from the existing ₹ 10 lakhs. b) The persons present in more than one state with the same PAN may face a new difficulty in tracking the turnover limit of ₹ 50lkh, collectively. c) Input tax credit as per section 18(3) of MGL, the carry forward credit and compliance there off may discourage to the scheme. d) A majority of works contract cases were availing the composition scheme as there was no turnover limit earlier. However, at present, the segment was regarded as service and hence not eligible at all for the composition scheme. e) In the case of work contractor, builder, the credit available with respect to ITC
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