The Government’s GST composition scheme, aimed at easing the load on small taxpayers, had undergone a positive transformation. Initially designed for goods suppliers, the GST Composition Scheme benefits service providers as well. If you are a service provider, you must read this article to know all about the GST Composition Scheme for Service Providers.
What is the GST Composition Scheme for Service Providers?
The Composition Scheme for GST Registration for Service Providers offers taxpayers who provide services with an annual turnover of up to Rs. 50 lakh the option to pay taxes at a reduced rate, provided certain conditions are met.
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Eligibility for GST Composition Scheme
- Firstly, The service provider’s turnover in the preceding financial year must be below Rs. 50 lakh.
- The service provider should refrain from supplying non-taxable goods.
- The service provider must avoid engaging in inter-state supplies.
- Furthermore, The service provider should not conduct transactions through an e-commerce operator.
- The service provider must not be a casual taxable person or non-resident taxable person.
- The service provider is required to issue a bill of supply in lieu of a tax invoice, with the inclusion of the term ‘composition taxable person.’
- Moreover, The service provider is prohibited from charging and collecting tax from the customer.
- The service provider cannot claim input tax credit.
- Normal tax payment is mandatory for reverse charge supplies.
- The service provider is restricted from supplying ice cream, other edible ice (regardless of cocoa content), pan masala, tobacco, and manufactured tobacco substitutes.
Advantages and Disadvantages of GST Composition Scheme for Service Providers
Advantages of GST Composition Scheme
- Simplified compliance: Businesses under the composition scheme face reduced compliance requirements, such as maintaining detailed books of accounts and filing frequent tax returns.
- Lower tax burden: The composition scheme offers lower tax rates compared to the standard GST regime, providing financial relief to eligible businesses.
Disadvantages of GST Composition Scheme
- Limited input tax credit: Businesses under the composition scheme cannot avail input tax credit on purchases, increasing their overall tax burden.
- No tax pass-through: Businesses cannot charge or collect GST from customers under the composition scheme. They are solely responsible for bearing the GST liability.
- Restricted business operations: Businesses under the composition scheme cannot engage in interstate transactions or exports, limiting their business scope.
GST Composition Scheme Rates for Service Providers
- Composition service providers are subject to a 6% GST rate, comprising 3% CGST and 3% SGST.
- When calculating the total annual turnover, the value of supply for exempt services related to extending deposits, loans, or advances, where the income is in the form of interest or discount, should not be included.
Important Note: Service providers opting for the composition scheme need to fulfil compliance requirements by doing annual GST Return Filing and making quarterly tax payments, accompanied by a straightforward declaration.
In addition, Learn about Annual GST Return Filing in detail: Know all about GSTR-9 | Final Annual GST Return
How To Get GST Registration under Composition Scheme for Service Providers?
Businesses can opt for the Composition Scheme only before the commencement of a financial year.
To enrol in the Composition Scheme for Service Providers, businesses must submit Form CMP-02.
However, Once a business has opted for the Composition Scheme, there is no annual requirement to reapply for it.
Our GST experts can help you get GST Registration under Composition Scheme. Contact Right now at: 8881-069-069