GST for Traders – Do they need GST Registration?


GST is applicable if the aggregate turnover of a business exceeds the threshold limit. Once the business is registered under GST, it must charge GST on the sale of goods or services. It is applicable to manufacturers, traders and service providers. Does GST apply to stock traders also? The applicability of GST to trading in securities is a confusing question prevalent amongst traders. GST is not applicable to income from trading in stocks, shares, mutual funds, futures, options etc. Let us understand in detail.

Does having GST for Traders have any benefit?

What is recommended - having GSTIN and filing both GST and ITR or just simply file ITR no need of GST?

Does having GST for Traders have any benefit?

What is recommended - having GSTIN and filing both GST and ITR or just simply file ITR no need of GST?

Is GST applicable to Securities Traders?

It is mandatory to register under GST if the Aggregate Turnover exceeds the threshold limit of INR 40 Lakh (INR 20 Lakh for special category states) for sale of goods or INR 20 Lakh (INR 10 Lakh for special category states) for sale of services. As per Section 22 of CGST Act, Aggregate Turnover is the total sales value of taxable/exempt goods or services.

The GST Act specifically excludes Securities from the definition of Goods. As per Section 2(52), Goods means any movable property except money and securities. The definition of Services means anything other than goods, money and securities. Thus, trading in shares and securities is not considered as supply as per the GST Act and falls outside the purview of GST. Therefore, securities traders are not liable to register under GST.

However, it must be noted that if a broker is earning brokerage income from securities trading, GST registration is mandatory if such brokerage exceeds the threshold limit.

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Should I include Trading Turnover in Aggregate Turnover?

Trading Turnover is the turnover calculated for each trading segment as per the reporting requirements of the Income Tax Act.

Aggregate Turnover includes the sum of the sale of goods and services. Since the definition of goods and services excludes securities, the aggregate turnover should not include trading turnover to determine the applicability of GST Registration.

Trading Expenses on Securities Trading

Expenses incurred on trading in securities also includes CGST, SGST or IGST. This is the GST on expenses such as brokerage, transaction costs, turnover fees, etc that the trader pays for trading transactions. The trader can claim such expenses against the profit/loss from trading while filing the Income Tax Return on the income tax website.

GST for Traders – Reporting in ITR-3

Turnover as per ITR must match with sales reported in GST Return to avoid any mismatch notice. If the trader does not have GST Registration, he/she need not report details of GSTIN in the Income Tax Return. If the trader has income from any business other than securities trading and has GST Registration, it is advisable to report the trading turnover from securities trading under Non-GST Supply in the GST Return.

FAQs

Does securities also cover derivatives?

The GST Act excludes Securities from the definition of Goods. Securities shall have the same meaning as per Section 2 of Securities Contracts (Regulation) Act, 1956 and includes shares, scrips, stocks, bonds, debentures, debenture stock, other marketable securities and derivatives.

Is GST applicable on brokerage earned in Stock broking services?

Yes. A stockbroker provides stockbroking services that fall under the definition of ‘Services’ under GST. Therefore, such sale value must be included in Aggregate Turnover to determine the applicability of GST Registration.

My trading turnover from share trading exceeds INR 40 lacs. Do I need to register under GST?

Trading in securities does not fall under GST since the definition of ‘Goods’ and ‘Services’ as per the GST Act excludes securities. Therefore, even if the trading turnover exceeds the threshold limit, GST is not applicable.

GST Registration Types

GST Registration means applying for a unique GST Number or GSTIN i.e. GST Identification Number on the GST Portal. The taxpayer requires GSTIN to collect and pay GST on the outward supplies i.e. sales and claim GST input tax credit on the inward supplies i.e. purchases. Types of GST Registration depends on the nature of the business.

Types of GST Registration

  1. Compulsory Registration
    Under certain situations, the dealer must take Compulsory Registration under GST irrespective of the turnover. For eg: inter-state sales of taxable goods, e-commerce operator, e-commerce seller, etc
  2. Voluntary Registration
    A business that does not need to apply for compulsory registration can apply for registration on a voluntary basis. It is called Voluntary Registration under GST.
  3. Registration under Composition Scheme
    If the aggregate turnover exceeds the prescribed threshold limit of Rs.40 lacs (Rs.20 lacs for special category states) for goods or Rs.20 lacs (Rs.10 lacs for special category states) but is less than Rs.1.5 Cr (Rs.75 lacs for special category states), the dealer can register under Composition Scheme. In case of services, if the aggregate turnover exceeds Rs.20 lacs (Rs.10 lacs for special category states) but it is less than Rs.50 lacs, the dealer can register under the Composition Scheme. Under this scheme, the taxpayer should pay GST at a fixed rate on turnover and the compliance is lesser than in case of normal registration.
  4. No Registration
    The following category of persons do not require GST Registration:
    • The business for which aggregate turnover during the financial year does not exceed Rs.40 lacs for goods (Rs.20 lacs for special category states) or Rs.20 lacs for services (Rs.10 lacs for special category states).
    • The business that does not fall under the provisions of compulsory registration.
    • Persons selling goods or services that are exempt under GST or not covered under GST.
    • Agriculturists for the supply of crops produced from the cultivation of land.
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FAQs

What are the special category states under GST?

The following are the special category states under GST to which the threshold limit for registration is lesser.
1. Arunachal Pradesh
2. Assam
3. Jammu & Kashmir
4. Manipur
5. Meghalaya
6. Mizoram
7. Nagaland
8. Sikkim
9. Tripura
10. Himachal Pradesh
11. Uttarakhand

What is Aggregate Turnover under GST?

Aggregate Turnover means the total value of sales made by a business registered under the same PAN. Sales include the aggregate of the following:
1. Taxable sales
2. Exempt sales
3. Exports
Aggregate turnover excludes:
1. Value of tax on sales
2. Value of purchases on which tax is paid under RCM (reverse charge mechanism)

Can I have more than one GST registration on a single PAN?

Yes. It is possible in the case of multiple business verticals within the same state. A person having different categories of business may obtain multiple registrations with the same PAN within a single State. Further, these will be treated as separate taxable persons for all purposes of GST.

What is the fee for a GST Registration?

There is no fee charged by the government for GST registration. However, a professional fee may be charged if services of a GST Practitioner or a Chartered Accountant are used.

What is Voluntary Registration under GST?

Voluntary Registration means applying for registration under GST (Goods and Service Tax) on a voluntary basis. The taxpayers who are not required to register as per the GST Act can apply for voluntary registration under GST.

GST Registration is allotment of a unique GST Number or GSTIN i.e. GST Identification Number to a business by the GST Department. The business registered under GST should:

  • Collect GST on the outward supplies i.e. sales
  • Claim the GST Input Tax Credit on the inward supplies i.e. purchases
  • Pay GST to the government by making payment of challan on the GST Portal

A business will be required to register under GST if:

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Thus, a dealer whose aggregate turnover is less than the prescribed threshold limit does not need to register under GST. Such dealers can apply for voluntary registration under GST. The taxpayer may apply for voluntary registration under GST to avail of the benefits available to GST registered dealers.

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Who should opt for Voluntary Registration under GST?

Whether a dealer should apply for a GST registration or not depends on various factors. Check when should you apply for registration.

Apply for voluntary registration under GST for following reasons

  1. Claim ITC on purchases – If you are registered under GST, you can claim the input tax credit of the GST paid on your purchases. You can claim GST input tax credit if you are registered under GST.
  2. Status of the registered dealer – If you are a GST registered dealer, you will receive a certificate of registration that will act as a valid proof of the legal status of the business.
  3. Competitive Advantage – Larger organizations and MNCs prefer to work with the GST registered dealers. A GST registered dealer can work with such companies to gain a competitive advantage.
  4. Inter-state sales – If you plan to sell goods or services outside your state in the future, you can apply for voluntary registration. By voluntary registration, you can avoid compulsory GST registration in the future.
  5. E-Commerce sales – If you plan to sell goods or services on an e-commerce platform, you can apply for voluntary GST registration to avoid compulsory registration under GST in the future.
  6. Unutilised ITC of earlier taxes – Dealer who has unutilised input tax credit under service tax, VAT, etc can carry forward this credit. This credit can be used for payment of taxes after registering under GST.

Do not apply for voluntary registration under GST for following reasons

  1. Sales to unregistered dealers – If your customers are not registered under GST, they cannot claim the credit of GST paid on the purchase. Thus, it would be beneficial to not charge GST from them. In that case, do not apply for registration.
  2. Purchases from unregistered dealers – If you purchase goods and services from unregistered dealers, you do not pay GST on purchases. Thus, you do not have any input tax credit to claim and registration may not be taken.
  3. GST Compliances – Once you’re registered under GST, it is compulsory to follow the provisions of the GST Act. To avoid complicated compliances like filing returns, payment of tax, maintenance of accounts, etc, registration should not be taken.
I am registered under service tax but my turnover is below 20 lacs. Should I register under GST?
You should register under GST if you wish to claim the credit of taxes paid on purchases or plan to sell your product online on an e-commerce platform
Read Answer
I am registered under service tax but my turnover is below 20 lacs. Should I register under GST?
You should register under GST if you wish to claim the credit of taxes paid on purchases or plan to sell your product online on an e-commerce platform
Read Answer

FAQs

What is Voluntary Registration?

Voluntary Registration means applying for registration under GST (Goods and Service Tax) on a voluntary basis. The dealers who are not required to register as per the GST Act can apply for voluntary registration on GST Portal.

Why should you apply for Voluntary GST registration?

The following can be the reasons for a business to apply for Voluntary GST:
1. Claim ITC on purchases
2. Status of the registered dealer
3. Competitive Advantage
4. Inter-state sales
5. E-Commerce sales
6. Unutilized ITC of earlier taxes

What is the GST Registration process?

Mentioned below is a brief process for GST Registration on the GST Portal:

1. Under New Registration on GST Portal, enter the basic details
2. You will see a GSTIN/ UIN / Provisional ID
3. Verify using OTP (One-time Password)
4. You will receive a TRN (Temporary Registration Number)
5. Verify the TRN by OTP Verification
6. Enter the relevant details and Upload the documents
7. Verify your application
8. Submit

When is Compulsory Registration under GST required?

GST Registration means the allotment of a unique GST Number or GSTIN to a taxpayer who is liable to collect and pay tax to the government after claiming the credit of the taxes paid on purchases. Generally, the GST registration is compulsory only if the Aggregate Turnover of a business exceeds the threshold limit during the financial year. However, in certain cases, compulsory registration under GST is required even if the turnover is less than the prescribed threshold limit. A taxpayer can apply for GST Registration on the GST Portal.

Who needs Compulsory Registration under GST?

1. Inter-state sale of Taxable Goods – Compulsory Registration

Inter-state supply means sales of goods outside the state of registration.

Description Whether GST Registration required?
Inter-state sale of taxable goods Compulsory registration irrespective of turnover
Inter-state sale of taxable services, exempt goods or services, nil-rated goods or services, etc

Compulsory registration only if the turnover exceeds the prescribed threshold limit for each state. Refer to the threshold limit for goods and services in the table below

StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh10 lacs20 lacs20 lacs
Himachal Pradesh10 lacs20 lacs40 lacs
Jammu and Kashmir20 lacs20 lacs40 lacs
Puducherry, Telangana20 lacs20 lacs20 lacs
Other States20 lacs20 lacs40 lacs
StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh, Himachal Pradesh10 lacs20 lacs20 lacs
Other States20 lacs20 lacs20 lacs

2. E-Commerce Operators or TCS Collectors – Compulsory Registration

An e-commerce operator is a person who owns and manages a digital platform for an e-commerce business i.e. buy and sell goods or services over a digital network. The e-commerce operator is also called a TCS collector since he is liable to collect TCS (Tax Collected at Source) before making payments to the e-commerce suppliers. Thus, such persons should take a compulsory GST registration irrespective of the turnover.

3. E-Commerce Supplier of Goods – Compulsory Registration

An e-commerce supplier is a person who sells goods or services online through an e-commerce platform managed by an e-commerce operator.

Description Whether GST Registration required?
E-commerce supplier of goods Compulsory registration irrespective of turnover
E-commerce supplier of services Compulsory registration only if the turnover exceeds the prescribed threshold limit for each state. Refer to the threshold limit for goods and services in the table below
StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh10 lacs20 lacs20 lacs
Himachal Pradesh10 lacs20 lacs40 lacs
Jammu and Kashmir20 lacs20 lacs40 lacs
Puducherry, Telangana20 lacs20 lacs20 lacs
Other States20 lacs20 lacs40 lacs
StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh, Himachal Pradesh10 lacs20 lacs20 lacs
Other States20 lacs20 lacs20 lacs

4. NRTP – Non-Resident Taxable Person

An NRTP must take a compulsory registration. It means a person:

  • who is a non-resident in India,
  • has no fixed place of business in India and
  • sells goods or services in India as a principal or an agent.

5. CTP – Casual Taxable Person

A CTP must take a compulsory registration. It means a person:

  • who sells goods or services in India as a principal or an agent,
  • he has no fixed place of business in the state from which he sells goods or services.

6. ISD – Input Service Distributor

An ISD must take a compulsory registration. It means the head office:

  • which receives tax invoices for input services used by all its branches,
  • which issues tax invoices to its branches to distribute credit of tax paid on the input services.

7. Agent

An agent is a person who sells goods or services on behalf of another person i.e. principal. Further, it includes a commission agent, factor, broker etc. As per the GST Act, an agent must take compulsory registration under GST.

What is the impact of GST on a commission agent?
The value of service provided by a commission agent is taxable and not the amount of reimbursement claimed from principal. Know more about provisions of registration, returns, invoicing, rate etc applicable to a commission agent
Read Answer
What is the impact of GST on a commission agent?
The value of service provided by a commission agent is taxable and not the amount of reimbursement claimed from principal. Know more about provisions of registration, returns, invoicing, rate etc applicable to a commission agent
Read Answer

8. OIDAR Service Provider

OIDAR i.e. Online Information Database Access and Retrieval Services. When services are supplied online over the internet without a physical interface between the seller and buyer, compulsory registration must be taken by the seller.

9. TDS Deductor

TDS Deductor must take a compulsory registration under GST. A certain category of persons such as government department, local authority, government agency etc is required to deduct tax:

  • At the rate of 2%,
  • On making payment to the supplier of goods or services,
  • If the invoice value exceeds Rs.2.5 lacs.

10. RCM – Reverse Charge Mechanism

The buyer of goods or services is required to pay tax under provisions of the reverse charge mechanism.

FAQs

When is GST registration compulsory?

The GST registration is compulsory only if the aggregate turnover of a business exceeds the prescribed threshold limit for sale of goods and services during the financial year. However, in certain cases, compulsory registration under GST is required even if the turnover is less than the prescribed threshold limit.

Who is required to register under GST?

Following are the people required to register under GST:

1. Inter-state suppliers of Taxable Goods
2. E-Commerce Operators or TCS Collectors
3. E-Commerce Supplier of Goods
4. Non-Resident Taxable Person i.e. NRTP
5. Casual Taxable Person i.e. CTP
6. Input Service Distributor i.e. ISD
7. Agent
8. OIDAR Service Provider
9. TDS Deductor
10. RCM i.e. Reverse Charge Mechanism

What is the GST Registration process?

Mentioned below is a brief process for GST Registration on the GST Portal:

1. Under New Registration on GST Portal, enter the basic details
2. You will see a GSTIN/ UIN / Provisional ID
3. Verify using OTP (One-time Password)
4. You will receive a TRN (Temporary Registration Number)
5. Verify the TRN by OTP Verification
6. Enter the relevant details and Upload the documents
7. Verify your application
8. Submit

Calculate Aggregate Turnover under GST

Aggregate Turnover means the total value of sales of a GST registered business having the same PAN and calculated on an all India basis. Under GST, you can calculate the aggregate turnover for the following purpose:

Aggregate Turnover – Determine eligibility for GST Registration

If the Aggregate Turnover of the business exceeds the threshold limit as prescribed in the GST Act, the business must compulsorily register under GST. Following the revised threshold limit for GST Registration:

StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh10 lacs20 lacs20 lacs
Himachal Pradesh10 lacs20 lacs40 lacs
Jammu and Kashmir20 lacs20 lacs40 lacs
Puducherry, Telangana20 lacs20 lacs20 lacs
Other States20 lacs20 lacs40 lacs
StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh, Himachal Pradesh10 lacs20 lacs20 lacs
Other States20 lacs20 lacs20 lacs
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Aggregate Turnover – Determine eligibility to avail benefit of Composition Scheme

If the aggregate turnover exceeds Rs.40 lakhs for goods (Rs.20 lakhs for special category states) but is up to Rs. 1.5 Cr (Rs.75 lacs for special category states), the business can register under the composition scheme to reduce compliances and pay tax at a specified rate of turnover. For services, if the aggregate turnover exceeds Rs.20 lakhs for services (Rs.10 lakhs for special category states) but is up to Rs. 50 lacs, the business can register under the composition scheme on GST Portal. In case of a composition scheme, the outward tax payable is calculated on the basis of turnover in the state.

How to Calculate Aggregate Turnover under GST?

Aggregate Turnover of a business is the total value of:

  1. Taxable supplies
  2. Exempt supplies
  3. Export of goods or services
  4. Inter-state supplies

To calculate aggregate turnover, the following points must be considered:

  1. It excludes the value of inward supplies on which tax is payable by a person on a reverse charge basis.
  2. It excludes the taxes – CGST, SGST, UTGST, IGST and Compensation Cess
  3. Also, it excludes the value of goods or services not covered under the GST Act
  4. It is the total value of turnover of all the business on the same PAN
  5. It is the total value of turnover of the business on all India basis

Example 1

Mr.X living in Mumbai is a trader of goods. On the same PAN, he has a branch in Delhi. The details of his sales (excluding GST) during the FY 19-20 are:

  • Taxable goods from Mumbai = Rs.15,00,000
  • Exempt goods from Delhi = Rs.10,00,000
  • Exports from Mumbai = Rs.5,00,000
  • Non-GST Goods from Delhi = Rs.1,00,000
  • Total GST on above sales is Rs.1,50,000

Determine whether he is liable to register under GST.

Solution

Calculation of  aggregate turnover:

Turnover of both Mumbai head office and Delhi branch should be combined since the business is on the same PAN

Taxable goods Rs. 15,00,000
Exempt goods Rs. 10,00,000
Export of goods Rs.   5,00,000
Total Turnover Rs. 30,00,000

Since the aggregate turnover is less than Rs.40 lacs for business situated in Maharashtra, registration under GST is not required.

Example 2:

If in Example 1, the head office was situated in Assam. Determine whether he is liable to register under GST.

Solution

Since the business is situated in a special category state i.e. Assam and the aggregate turnover exceeds Rs.20 lacs, he is liable to register under GST.

FAQs

What is the purpose of calculating aggregate turnover in GST?

Under GST, the aggregate turnover is required to be calculated for the following purpose:
1. Determine eligibility for GST Registration
2. Determine eligibility to avail benefit of Composition Scheme

What does aggregate turnover of a business in GST consists of?

Aggregate Turnover of a business is the total value of:
1. Taxable Sales
2. Exempt Sales
3. Export of goods or services
4. Inter-State Sales

The aggregate turnover of business in Gujarat is Rs. 30 lacs. The business makes an inter-state supply of goods to Maharashtra. Is GST Registration mandatory?

The aggregate turnover does not cross the threshold limit of Rs. 40 lacs for GST Registration in Gujarat. However, a business that makes the inter-state supply of goods must take compulsory registration under GST. Therefore, the taxpayer must apply for GST Registration since he/she is engaged in inter-state sales.

How to change monthly return to quarterly return in GST?

You can select the filing type i.e Quarterly or Monthly when you file your first GST Return on GST Portal. The taxpayer can change the monthly return to quarterly return and vice-versa from their account on the GST Portal. The system determines the filing type on the basis of two questions :

  1. If the answer to the first question is ‘Yes’, the taxpayer can opt for a monthly scheme or quarterly scheme in the second question
  2. If the answer to the first question is ‘No’, the taxpayer does not have an option to opt for the quarterly scheme

Thus, taxpayers under Quarterly Scheme can file GST Returns on a monthly basis by opting for Monthly Scheme.

However, Taxpayers falling under Monthly Scheme must file returns on a monthly basis. They do not have an option to switch to the quarterly scheme.

How can I change the filing type of GST Return from monthly to quarterly?

Earlier, the taxpayer did not have an option to reverse the selection of filing type once selected on the GST Portal. However, The option to edit the filing type is now available on the GST Portal from FY 2018-19 subject to the following conditions:

  • Option to change the preference is available only once
  • Form GSTR-1 is not submitted or filed for any of the return periods in FY 2018-19

Here are the steps to edit the preference:

  1. Visit GST Portal

    Login to GST Portal

  2. On the ‘File Returns’ view

    Select the Financial Year and Period

  3. Click on the ‘EDIT’ button to change the filing preference

    Select the option and click on ‘SUBMIT’

FAQs

If my turnover is less than INR 1.5 Cr, do I need to file GSTR-3B on a monthly basis?

Every registered person, irrespective of turnover, needs to file GSTR-3B for the months of July to December, by the 20th day of the succeeding month.

If I am required to file monthly returns then how will I claim ITC on purchases made from a person filing quarterly returns?

In such a case, you shall avail monthly ITC on a self-declaration basis. You will have to enter the details of the invoices of purchases from a quarterly filer in your monthly GSTR-2. These details will be reconciled with the GSTR-1 filed by your supplier at the end of the quarter.

Quarterly filing of return is option or compulsory?

Quarterly filing of return is optional, not compulsory. Periodicity of filing return will be deemed to be monthly for all taxpayers unless quarterly filing of the return is opted for.

Should I file my GST Return monthly or quarterly?

Every business registered under GST must file all its GST Returns regularly within the due dates to avoid penalties and late fees. Periodicity of filing GST return will be deemed to be monthly for all taxpayers unless quarterly filing of the return is opted for

Taxpayer registered under Regular Scheme

For business registered under the regular scheme, the type of GST Return and the frequency of filing it depends on the turnover of the business.

1. Returns under Monthly Scheme

If the aggregate turnover of the business in the preceding financial year exceeded Rs.1.5 Crore OR the aggregate turnover during the current financial year is expected to exceed Rs.1.5 Crore, following returns are to be filed:

GST Return Frequency Description Due Date
GSTR-3B Monthly Summary Return with details of outward supplies, inward supplies and payment of tax 20th of next month
GSTR-1 Monthly Sales Return with details of outward supplies for businesses with aggregate turnover of more than Rs.1.5 Crore 11th of next month

2. Returns under Quarterly Scheme

If the aggregate turnover of the business in the preceding financial year was up to Rs.1.5 Crore OR the aggregate turnover during the current financial year is expected to be up to Rs.1.5 Crore, following returns are to be filed:

Form Frequency Description Due Date
GSTR-3B Monthly Summary Return with details of outward supplies, inward supplies and payment of tax 20th of next month
GSTR-1 Quarterly Sales Return with details of outward supplies for business with aggregate turnover of more than Rs.1.5 Crore last date of next month from end of the quarter

Taxpayer registered under Composition Scheme

A business can register under the Composition Scheme if the aggregate turnover is up to Rs.1 Crore. Tax is to be paid at a specified rate based on the nature of the business.

Taxpayers who have applied for registration under Composition Scheme should file the following GST Return:

Form Frequency Description Due Date
GSTR-4 Quarterly Return with details of outward supplies and payment of tax at a fixed rate of turnover of the return period 18th of next month from end of the quarter

FAQs

Who should file GSTR1 monthly?

Every registered dealer is required to file GSTR-1 every month. The return contains details of all outward supplies made during the month. However, certain taxpayers having annual turnover upto Rs 1.5 crores can opt to file the GSTR-1 once in every quarter.

Can the taxpayer change the period (whether monthly or quarterly) of filing his return?

The taxpayer will have the option to change the period (from quarterly to monthly and vice versa) of filing his returns only once – at the time of filing his first return for that financial year.

How do I convert from monthly to Quarterly?

For change Return filing Status from Monthly to Quarterly, follow the steps
1. Visit GST Portal
2. Enter login details, then click login.
3. Click file returns.
4. Select month, then click search.
5. Select yes if you are change monthly to Quarterly, then click search.

Composition Scheme v/s Regular Scheme under GST

When the Aggregate Turnover of a business exceeds the threshold limit of registration under GST, they need to take Compulsory Registration. Such business can take benefit of the Composition Scheme under GST. It is a voluntary scheme under which there is less compliance. 

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It is important to note that a business must fulfill certain conditions to take benefit of the Composition Scheme. If the taxpayer fulfills the conditions, he/she is eligible to apply for registration under the Composition Scheme on GST Portal.

GST Composition Scheme v/s GST Regular Scheme

To analyse whether a business should register under the composition scheme or not, the following factors should be considered: 

  Opt for GST Composition Scheme Opt for GST Regular Scheme
Nature of Customers Goods or services are supplied to unregistered dealers or composite dealers who are not ready to pay GST Goods or services are supplied to registered dealers who are ready to pay GST
Claim Input Tax Credit The taxpayer does not wish to claim input tax credit since the majority of purchase is from unregistered dealers or composite dealers  Taxpayer wishes to claim the input tax credit of GST paid on purchases from registered dealers
Type of Sales Business making only Intra-state sales of goods i.e. sales within the state of registration Business making Inter-state sales of goods i.e. sales outside the state of registration and exports of goods
Goods or Services Taxpayer dealing in the sale of taxable goods or taxable services  Taxpayer dealing in the sale of non-taxable goods or non-taxable services
Record Keeping Business wants to avoid record-keeping and accounting  Business can maintain accounting and record-keeping  
E-Commerce Sales A taxpayer has no plans to sell goods or services online through an e-commerce portal  Taxpayer plans to sell goods or services online through an e-commerce portal  

FAQs

What is the tax rate for taxpayer under Composition Scheme?

a. Trader of Goods = 1% ( CGST 0.5% & SGST 0.5%)
b. Manufacturer of Goods = 2% (CGST 1% & SGST 1%)
c. Restaurant Services = 5% (CGST 2.5% & SGST 2.5%)
d. Other Services = 6% (CGST 3% & SGST 3%)

I am an ice cream manufacturer with sales in one state only. Can I register under Composition Scheme?

No. The following type of persons cannot register under Composition Scheme of GST:
– Ice cream and other edible ice, whether or not containing cocoa
– Pan masala
– All goods i.e. tobacco and manufactured tobacco substitutes

Can I register under Regular Scheme now and later opt for Composition Scheme under GST?

The taxpayer has an option to opt in or opt out of Composition Scheme at the beginning of each financial year. Thus, you can register under regular scheme now and later opt in for Composition Scheme provided you are elegible to take benefit of Composition Scheme. However, this option cannot be availed in the middle of a financial year.

What is Composition Scheme under GST?

Composition Scheme is a voluntary and optional scheme with simpler returns and lesser compliance under GST. A business should take a Compulsory Registration under GST if it’s aggregate turnover in a financial year exceeds the threshold limit opted by the respective states. Such business can avail the benefit of Composition Scheme u/s 10 of the GST Act.

Features of Composition Scheme under GST

  1. If the Aggregate Turnover of business is up to Rs.1.5 Cr for goods and restaurant services (Rs.75 lacs for special category states) or Rs.50 lacs for other services during a financial year, it can opt for Composition Scheme.
  2. Taxpayer cannot collect GST from its customers on the sale of goods or services.
  3. Taxpayer cannot claim an Input Tax Credit of the GST paid on the purchase of goods or services.
  4. FY 2019-20 onwards, a Composite Dealer should file GSTR-4 on an annual basis on or before 30th April from the end of the financial year. They should now pay tax on quarterly basis under Form GST CMP-08. Earlier up to FY 2018-19, GSTR-4 was filed quarterly or before the 18th of the month from the end of a quarter. A Composite Dealer should also file an annual return GSTR-9A on or before 31st December from the end of financial year.
  5. A composite dealer needs to pay tax at a fixed rate on its turnover. The tax rate is either 1%, 2%, 5% or 6% based on the nature of the business.
  6. Business should mention ‘composition taxable person’ on its notice boards and signboards.
  7. The taxpayer should mention ‘composition taxable person’ on the Bill of Supply issued to its customers.
  8. Any business that opts for composition scheme without meeting the prescribed conditions would be subject to a penalty by the GST department.

FAQs

How do I opt for Composition Levy if I am already registered as a regular taxpayer?

To opt for Composition Scheme on GST Portal, follow these steps:
1. Log in to GST Portal
2. Go to Services > Registration > Application to Opt for Composition Levy
3. Fill the form with required details and submit

Can I opt for Composition Levy, if I am a service provider?

Earlier, the benefit of the Composition Scheme was not available to taxpayers selling services except restaurant services. However, FY 2019-20 onwards, the benefit of the Composition Scheme was extended to taxpayers selling other services. If the aggregate turnover is up to Rs. 50 lacs, a service provider can opt for Composition Scheme and pay GST at the rate of 6%.

How do I withdraw from Composition Levy on the GST Portal?

To withdraw from Composition Scheme on GST Portal, follow these steps:
1. Log in to GST Portal
2. Go to Services > Registration > Application for Withdrawal from Composition Levy
3. Fill the form with required details and submit

What is the tax rate under Composition Scheme?

Business registered under Composition Scheme cannot collect GST on sales made to its customers. It cannot claim the input tax credit of GST paid on purchases of goods and services. A composite dealer needs to pay GST to the government at a prescribed rate determined on the nature of its business. Here is the prescribed tax rate for different categories of registered suppliers under Composition Scheme:

Nature of Business Item Type Total CGST SGST
Trader Goods 1% 0.5% 0.5%
Manufacturer Goods 2% 1% 1%
Restaurants not serving alcohol Services 5% 2.5% 2.5%
Other Services (effective from 1st April 2019) Services 6% 3% 3%
  • A composite dealer should pay two kinds of taxes:
    • Tax on Sales – to be paid on sales at prescribed rates as per the above table
    • Tax on Purchase – to be paid on purchases falling under Reverse Charge Mechanism (RCM)
  • The prescribed tax rate under composition scheme is calculated on the aggregate turnover in a state or union territory.
  • A composite dealer must pay CGST and SGST at the prescribed rate on his turnover. He shall not pay IGST.

Example – Tax Rate Composition Scheme

Mr.A is a trader registered under Composition Scheme.
Sales Turnover from 01.04.2018 to 30.06.2018 is Rs.10,00,000.
Tax Liability is:
Pay CGST = Rs.5,000 (Rs.10,00,000*0.5%)
Pay SGST = Rs.5,000 (Rs.10,00,000*0.5%)

  • TXOS – TXOS i.e. Tax on Outward Supplies means the GST on sales of goods and services. Pay tax while filing CMP-08 of the relevant quarter
  • Tax can be paid by creating a challan on the GST Portal
  • A composite dealer cannot issue Tax Invoice to its customers. He must issue a Bill of Supply and cannot charge GST.

FAQs

Should a Composition Taxpayer pay IGST, CGST or SGST?

The taxpayer registered under Composition Scheme cannot collect GST from their customers. However, they must pay GST on sales at specified rates. Composite Dealer should pay CGST and SGST on sales on a quarterly basis. Eg: Tax Rate for a manufacturer of goods is 2%. Thus, manufacturer of taxable goods registered under composition scheme should pay CGST at 1% and SGST at 1% on sales turnover. Composite Dealer is not required to pay IGST on sales.

How should a Composite Dealer pay tax on GST Portal?

The taxpayer registered under Composition Scheme should pay tax while filing GST CMP-08 on the GST Portal. The taxpayer should enter data of sales and purchases in CMP-08 and pay challan to pay tax at the prescribed rate on sales.

What are the returns to be filed by a Composition taxpayer?

Composition taxpayer needs to pay tax and furnish a statement, every quarter in FORM GST CMP-08. Further, he/she is also required to furnish a return for every financial year in FORM GSTR-4.