What are disadvantages of registering under Composition Scheme in GST?

author portrait

Sakshi Shah

Bill of Supply
Composition Scheme
GST
GSTR-4
ITC

Registration under the composition scheme in GST has its own set of benefits and drawbacks. The taxpayer should analyse the advantages and disadvantages to opt for GST Composition Scheme on GST Portal.

What is Composition Scheme under GST?
Read about Composition Scheme under GST and its features - calculate aggregate turnover, bill of supply, GSTR-4, GST rate, input tax credit
Read More
What is Composition Scheme under GST?
Read about Composition Scheme under GST and its features - calculate aggregate turnover, bill of supply, GSTR-4, GST rate, input tax credit
Read More

Disadvantages of GST Composition Scheme

What are the advantages of registering under the Composition Scheme in GST?
Read the advantages of registering under Composition Scheme - simple returns, less record keeping, limited tax liability, high liquidity etc
Read More
What are the advantages of registering under the Composition Scheme in GST?
Read the advantages of registering under Composition Scheme - simple returns, less record keeping, limited tax liability, high liquidity etc
Read More

FAQs

Can a person who has opted to pay tax under the composition scheme avail Input Tax Credit (ITC) on his inward supplies?

No. A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switches over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.

Can a registered person, who purchases goods from a taxable person paying tax under the composition scheme, avail credit of tax paid on purchases made from the composition dealer? 

No, as the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme cannot avail input tax credit.

Can a person paying tax under the composition scheme issue a tax invoice under GST? 

No. He can issue a bill of supply in lieu of tax invoice. As he cannot issue a tax invoice, he cannot charge and collect tax from his supplies.  

What are the consequences if a person who is not eligible opts for the composition scheme? 

If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for the determination of tax and penalty.

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    Close Bitnami banner
    Bitnami