Indirect Tax

Introduction

What is Indirect Tax?

As the name suggests, Indirect tax is not directly levied on the taxpayers. This tax is often levied on goods and

services which results in their higher prices. A few examples of indirect taxes in India include service tax,

central excise and customs duty, and value added tax (VAT).

Features of indirect tax

1. The service provider makes payment of indirect taxes and this is transferred to a final consumer.

2. Here service provider makes payments on indirect taxes which are transferred to the final consumer.

3. Indirect taxes used to have a regressive nature. Now they become quite progressive.

4. Indirect tax is hard to evade due to direct implementation through goods and services.

5. Indirect taxes are large growth-oriented since they demotivate the consumer.

Types of Indirect Tax

1. Service tax

This tax is levied by entities for rendering services like consulting, legal, and other such services. This tax is

collected from the service recipients and paid to the Central Government. From 1st June 2016, service tax was

14% with Swacch Bharat Cess (0.5%) and Krishi Kalyan Cess (0.5%) bringing up the applicable rate to 15%.

Small service providers with an income of less than INR 10 lakh per annum are exempted from paying this tax.

2. Excise duty

This duty is applicable on all goods that are manufactured in India. This indirect tax is payable by the

manufacturers and often passed on to the customers. This indirect tax in India is levied by the Central Government

and works according to the provisions of the Central Excise Act, 1944.

3. VAT

Value Added Tax (VAT) is imposed on the sale of movable goods in the nation. VAT is levied at all stages of the

production and distribution channel that include an instance of value addition. This tax is levied by the State

Governments under Entry 54 of the State List.

4. Customs duty

It is one of those indirect taxes that are applicable for bringing imported goods into the country. In certain instance,

this duty may also be levied on exported goods. The Customs Act, 1962 provides regulations on the levy and

collection of this duty, import and export procedures, penalties, prohibitions, and offence.

5. Securities Transaction Tax (STT)

This indirect tax is imposed when stocks are sold or purchased through any Indian stock exchange. STT was

introduced in 2004 and is applicable to shares, mutual funds, and future and options transactions. STT was

imposed to reduce the short-term capital gains tax and eliminate long-term capital gains tax.

6. Stamp duty

This is an indirect tax charged by state governments on the transfer of immovable property within their

jurisdiction. In addition, stamp duty is mandatory on all types of legal documents. Its rates vary from one state to

another.

7. Entertainment tax

The state governments charge such tax on every transaction related to entertainment. Some examples are movie

tickets, video game arcades, stage shows, exhibitions, amusement parks, and sports-related activities.

Advantages of Indirect Tax

(i) The Poor Can Contribute:

They are the only means of reaching the poor. It is a sound principle that every, individual should pay something,

however little, to the State. The poor are always exempted from paying direct taxes. They can be reached only

through indirect taxation.

(ii) Convenient:

They are convenient to both the tax-prayer and the State. I he tax-payers do not feel the burden much partly

because an indirect tax is paid in small amounts and partly because it is paid only when making purchases. But

the convenience is even greater due to the fact that the tax is “price-coated”.

(iii) Broad-based:

Indirect taxes can be spread over a wide range. Very heavy direct taxation at just one point may produce harmful

effects on social and economic life. As indirect taxes can be spread widely, they are more beneficial and suitable.

(iv) Easy Collection:

Collection takes place automatically when goods are bought and sold. A dealer collects the tax when he charges

a price. He is an honorary tax collector.

(v) Non-evadable:

They cannot be evaded, as they are a part of the price. They can be evaded only when the taxed article is not

consumed, and ‘his may not always be possible’

(v) Elastic:

They are very elastic in yield, imposed on necessaries of life which have an inelastic demand. Indirect taxes on

necessaries yield a large revenue, because people must buy these things.

(vi) Equitable:

When imposed on luxury or goods consumed by the rich, they are equitable. In such cases, only the .Veil-to-do

will pay the tax.

(vii) Check Harmful Consumption: .

By being imposed on harmful products, they can check consumption of harmful commodities. That is why

tobacco, wine and other intoxicants are taxed.

Disadvantages of Indirect Tax

(i) Regressive:

Indirect taxes are not equitable. For instance, salt tax in India fell more heavily on the poor than on the rich, as it

had to be paid at the same rate by all. Whether a rich man buys a commodity or a poor man, the price in the market

is the same for all. The tax is wrapped in the price. Hence, rich and poor pay the same amount, which is obviously

unfair. They are thus; regressive.

(ii) Uncertain:

Unless indirect taxes are imposed on necessaries, we cannot be sure of the revenue yield. In the case of goods,

with an elastic demand, the tax might not bring in much revenue. The tax will raise the price and contract the

demand. When the thing is not purchased, the question of the tax payment does not arise.

(iii) Raising Prices Unduly:

They cause the price of an article to rise b; more than the tax. A fraction of the money unit cannot be calculated,

so ever middleman tends to charge more than the tax. This process is cumulative.

(iv) Uneconomical:

The cost of collection is quite heavy. Every source o production has to be guarded. Large administrative staff is

required to administer such taxes. This turns out to be a costly affair.

(v) No Civic Consciousness:

These taxes do not develop civic consciousness, because many times the tax-payer does not even know that he is

paying tax. The tax is concealed in the price.

(vi) Harmful to Industries:

They discourage industries if raw materials are taxed. This will raise the cost of production and impair their

competitive capacity.

Evolution of Indirect Tax

Tax Law Tax Taxable Event Tax Collection Authority

Central Excise Act 1944 Central Excise Duty Manufacture/Production Central Govt.

Central Sales Tax Act 1956 Central Sales Tax Inter State Sales State Govt.

Customs Act 1962 Customs Duty Import/ Export Central Govt.

Finance Act 1994 Service Tax Taxable Service Central Govt.

Sales VAT Act 2005 VAT Sales within the state State Govt.

Goods and Services Tax

Act 2017

GST Sales of Goods &

Services

State and Central Govt.

What is GST?

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Services Tax Act was

passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax

Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

In simple words, Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services. This

law has replaced many indirect tax laws that previously existed in India.

History of GST

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then

for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017 the

GST Law came into force.

Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre. States mainly

collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Interstate sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case of interstate sale

of goods. Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was

levied by state and centre.

This led to a lot of overlapping of taxes levied by both state and centre.

For example, when goods were manufactured and sold, excise duty was charged by the centre. Over and above

Excise Duty, VAT was also charged by the State. This lead to a tax on tax also known as the cascading effect of

taxes.

The following is the list of indirect taxes in the pre-GST regime:

1. Central Excise Duty

2. Duties of Excise

3. Additional Duties of Excise

4. Additional Duties of Customs

5. Special Additional Duty of Customs

6. Cess

7. State VAT

8. Central Sales Tax

9. Purchase Tax

10. Luxury Tax

11. Entertainment Tax

12. Entry Tax

13. Taxes on advertisements

14. Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes.

Features of GST

1. Dual Goods and Service Tax : CGST and SGST

2. Inter -State Transactions and the IGST Mechanism: The Centre would levy and collect the Integrated

Goods and Services Tax (IGST) on all inter-State supply of goods and services. The IGST mechanism has

been designed to ensure seamless flow of input tax credit from one State to another

3. Destination-Based Consumption Tax: GST will be a destination-based tax. This implies that all SGST

collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.

4. Computation of GST on the basis of invoice credit method: The liability under the GST will be invoice

credit method i.e. CENVAT credit will be allowed on the basis of invoice issued by the suppliers.

5. Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states

respectively.

6. Goods and Services Tax Network (GSTN): A not-for-profit, Non-Government Company called Goods

and Services Tax Network (GSTN), jointly set up by the Central and State Governments will provide

shared IT infrastructure and services to the Central and State Governments, tax payers and other

stakeholders.

7. Input tax credit (ITC) set off: ITC for CGST & SGST will be taken for taxes allowed against central

and state respectively.

8. GST on Imports: Centre will levy IGST on inter-State supply of goods and services. Import of goods

will be subject to basic customs duty and IGST.

9. Maintenance of Records: A taxpayer or exporter would have to maintain separate details in books of

account for availment, utilization or refund of Input Tax Credit of CGST, SGST and IGST.

10. Administration of GST: Administration of GST will be the responsibility of the GST Council, which

will be the apex policy making body of the GST. Members of GST Council comprised of the Central and

State ministers in charge of the finance portfolio.

11. Goods and Service Tax Council: The GST Council will be a joint forum of the Centre and the States.

The Council will make recommendations to the Union and the States on important issues like tax rates,

exemption list, threshold limits, etc. One-half of the total number of Members of the Council will

constitute the quorum of GST council.

Advantages of GST

1. Upcoming of Common National Market

But with the coming of GST, the registered tax assesses now pay a single, uniform tax on goods and services

across the country. In addition to this, GST is led by a Central Tax Authority – the GST Council. This council

is chaired by the Union Finance Minister and has various states as its members. Each state member thus

participates in the formulation of the indirect tax policy of the country.

2. Elimination of Cascading Effect of Taxes

Cascading tax effect, also known as tax on tax, occurs when a good is taxed on every stage of its production,

until it is sold to the final consumer. In such a situation, each succeeding transfer of good is taxed inclusive

of the taxes charged on the preceding transfer. Consequently, the final consumer bears the burden of multiple

taxes imposed on every stage of production, leading to inflationary prices. To better understand the tax on tax

effect, let’s reconsider the above example.

3. Increased Exemption Limit for Small traders or Service Providers

The turnover limits for registration under GST are higher, which exempt the small traders and service

providers from paying GST. In fact, in the 32nd GST Council Meeting, the turnover limits for GST registration

were further increased. Hence, with the grant of such GST exemptions and benefits, 35 Lakh small traders,

manufacturers and service providers are expected to be benefited.

4. Small Businesses Benefit from the Composition Scheme

To encourage reduced taxes and tax compliances, the Composition Scheme was introduced under GST. Small

business owners registered under the scheme are required to pay a fixed percentage of tax on their turnover.

In addition to this, unlike the regular GST tax payers, small businesses registered under Composition Scheme

need to file one quarterly return. Following are the tax rates under Composition Scheme:

Small businesses with a turnover of Rs 1.50 crores would pay a flat GST rate of 1%. They will now file one

tax return only.

5. Reduced Tax Compliances as Number of Tax Returns to be Filed Under GST Has Come Down

The taxpayers would have to file only one monthly return. This return will contain two tables. One for

reporting outward supplies. And one for availing input tax credit based on invoices uploaded by the supplier.

Moreover, the proposed structure would allow the suppliers to upload the invoices on real time basis. Such

invoices can be viewed and locked by the buyer for availing input tax credit. And reconciliation of invoices

with that of buyers would take place offline.

6. Registration and Filing Returns under GST Made Simple as Everything is Done Online

Be it GST registration or return filing, a registered business owner can do everything online. This is certainly

opposed to the earlier indirect tax regime, where a business owner had to get himself registered separately for

various indirect taxes.

7. Regulated Unorganized Businesses

One of the motivations to implement GST was to get on board the unorganized sector and eventually increase

the tax base. According to Economic Survey 2017 – 2018, post the implementation of GST, there has been a

50% increase in the number of indirect tax payers. Furthermore, there has been an increase in the number of

voluntary registrations, especially small enterprises that sell goods to large enterprises. These small enterprises

want to come under the ambit of GST and claim input tax credit benefit.

Disadvantages of GST

1. Additional Software Expense

Most businesses use ERP or accounting software to manage their day-to-day operations. These solutions were

developed as per the traditional tax laws in the country. The implementation of GST required the businesses

to switch to GST-compliant solutions or standalone GST software to keep up with the new tax laws.

This not only increased the operational expenses but also required the business to offer additional training to

the employees to use the new software effectively.

2. Online Tax Regime

GST is an online tax system. From GST registration to filing GST returns, every aspect of this new tax regime

is done online. While businesses are gradually shifting to digital solutions, small businesses are still not very

well-versed with such modern technologies and solutions.

While the government has made the online system very simple, there is still a learning curve which can be

challenging for many businesses.

3. Higher Taxes for SMEs

If you are looking for what are the disadvantages of GST, you will come across how it has increased the tax

liabilities for small and medium enterprises (SMEs). This is because, in the past, the excise tax was only paid

by businesses with an annual turnover of above Rs. 1.5 crores. However, with the new tax regime, any

business with an annual turnover of above Rs. 20 lakhs is required to pay GST.

Constitutional Framework of GST

A constitution is an aggregate of fundamental principles or established precedents that constitute the legal

basis of a polity, organization or other type of entity, and commonly determine how that entity is to be

governed.

There are three types of GST framework in the world as 1. Central GST, 2. Independent GST and 3. Dual

GST. India has adopted the Dual GST concept. Dual GST concept means both central and state govt.

simultaneously will impose and collect taxes, as central govt. will collect Central Goods and Service Tax

(CGST) and state govt. will collect State Goods and Service Tax (SGST).

Regulatory Framework of GST in India

1. Constitutional 101 Amendment Act passed in 2016 to abolish old taxes and give power to both Central

and state govt. to impose and collect GST.

2. Central Goods and Services Tax Act 2017.

3. State Goods and Services Tax Act 2017 for each State.

4. GST compensation to States Act 2017.

5. Integrated Goods and Services Tax Act 2017.

GST council

GST Council is an apex member committee to modify, reconcile or to procure any law or regulation based on

the context of goods and services tax in India. The council is headed by the union finance minister Nirmala

Sitharaman assisted with the finance minister of all the states of India.

Why do we need a GST Council?

The GST council is the key decision-making body that will take all important decisions regarding the GST.

The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping

in mind special rates and provisions for some states. The predominant responsibility of the GST Council is to

ensure to have one uniform tax rate for goods and services across the nation

How is the GST Council structured?

The Goods and Services Tax (GST) is governed by the GST Council. Article 279 (1) of the amended Indian

Constitution states that the GST Council has to be constituted by the President within 60 days of the

commencement of the Article 279A.

According to the article, GST Council will be a joint forum for the Centre and the States. It consists of the

following members:

The Union Finance Minister, the Chairperson

As a member, the Union Minister of State will be in charge of Revenue of Finance

The Minister in charge of finance or taxation or any other Minister nominated by each State government, as

members.

GST Council recommendations

Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the

important issues related to GST, such as, the goods and services will be subject or exempted from the Goods

and Services Tax.

They lay down GST laws, principles that govern the following:

1. Place of Supply

2. Threshold limits

3. GST rates on goods and services

4. Special rates for raising additional resources during a natural calamity or disaster

5. Special GST rates for certain States

Features of GST Council that you must know:

1. GST Council office is set up in New Delhi

2. Revenue Secretary is appointed as the Ex-officio Secretary to the GST Council

3. Central Board of Excise and Customs (CBEC) is included as the chairperson as a permanent invitee (non-

voting) to all proceedings of the GST Council

4. Create a post for Additional Secretary to the GST Council

5. Create four posts of commissioner in the GST Council Secretariat (This is at the level of Joint Secretary)

6. GST Council Secretariat will have officers taken on deputation from both the Central and State

Governments

7. The cabinet also provides funds for meetings the expenses (recurring and nonrecurring) of the GST

Council Secretariat. This cost is completely borne by the Central government.

Structure of GST

Rates of GST

Zero rate

The zero rate tax is a nil tax rate that is applied on goods and services. This is equivalent to tax exemption and

does not have any effect on the price of the product. Items that are eligible for zero rate tax are decided by the

government.

The zero rate tax is applied on 50% of the items of the consumer price index (CPI) basket - an index that constantly

measures prices of commonly purchased consumer goods and services to measure inflation. The zero rate items

includes items such as, food grains, milk, curd, and other food items like eggs, cereal and meat. Also, metro travel,

education and healthcare are exempted from GST.

Lower rate

A lower rate of 5% is applied on the rest of the items in the CPI basket and other items of mass consumption.

This includes food items like sugar, tea, coffee, oil, and other essentials like PDS kerosene and LPG. Since the

taxation on coal has reduced from 11.69% to 5% under the GST regime, electricity generation has said to be less

expensive. The GST council had placed transport services in the 5% sector, which is applicable to Ola and Uber

aggregators. Air-conditioned train tickets are taxed at a rate of 5%, while non-AC train tickets are exempt from

GST. This, along with the zero rate tax, helps prevent inflation from having much of an impact on zero rate and

lower rate items, keeping the prices of all essential items in check.

Standard rate

There are two standard rates: 12% and 18%. Finance Minister Arun Jaitley, in his address to the press, said that

the Council had finalized two standard rates in order to keep inflation in check.

Imagine a product, which was previously taxed at 13%, charged a rate of 18% GST. This would increase the price

of the product by 5%, leading to inflation. To avoid this, the GST council decided to tax all goods and services

that were taxed at 9-15% at a standard rate of 12%. Processed foods are taxed at 12%. The rest of the goods

and services are taxed the second standard rate of 18%. Toiletries like hair oil, soap, and toothpaste are

taxed at 18%. Also, capital goods, industrial intermediaries, iron and steel, financial and telecom services

are included under this sector.

Higher rate

A higher rate of 28% is levied on white goods such as washing machines, air conditioners, refrigerators, small

cars, etc. Aerated drinks and cement are also included in this tier.

GST Compensation:

Due to a shift from origin based to destination based indirect tax structure, some States might face drop in revenue

in the initial years. To help the States in this transition phase, the Centre has committed to compensate all their

losses for a period of 5 years.

Accordingly, clause 19 has been inserted in the Constitution (122nd) Amendment Bill, 2014 to provide for

compensation to States by law, on the recommendation of the Goods and Services Tax Council, for loss of revenue

arising on account of implementation of the goods and services tax for a period of five years.

GST Network

The Goods and Service Tax Network (or GSTN) is a non-profit, non-government organization. It will manage

the entire IT system of the GST portal, which is the mother database for everything GST. This portal will be used

by the government to track every financial transaction, and will provide taxpayers with all services – from

registration to filing taxes and maintaining all tax details.

Features of the GSTN

The GSTN is a complex IT initiative. It will establish a uniform interface for the taxpayer and also create a

common and shared IT infrastructure between the Centre and States.

Trusted National Information Utility

The GSTN is a trusted National Information Utility (NIU) providing reliable, efficient and robust IT backbone

for the smooth functioning of GST in India.

Handles Complex Transactions

GST is a destination based tax. The adjustment of IGST (for inter-state trade) at the government level (Centre &

various states) will be extremely complex, considering the sheer volume of transactions all over India. A rapid

settlement mechanism amongst the States and the Centre will be possible only when there is a strong IT

infrastructure and service backbone which captures, processes and exchanges information.

All Information Will Be Secure

The government will have strategic control over the GSTN, as it is necessary to keep the information of all

taxpayers confidential and secure. The Central Government will have control over the composition of the Board,

mechanisms of Special Resolution and Shareholders Agreement, and agreements between the GSTN and other

state governments. Also, the shareholding pattern is such that the Government shareholding at 49% is far more

than that of any single private institution.

Expenses Will Be Shared

The user charges will be paid entirely by the Central Government and the State Governments in equal proportion

(i.e. 50:50) on behalf of all users. The state share will be then apportioned to individual states, in proportion to

the number of taxpayers in the state.

Functions of GSTN

GSTN is the backbone of the Common Portal which is the interface between the taxpayers and the government.

The entire process of GST is online starting from registration to the filing of returns.

It has to support about 3 billion invoices per month and the subsequent return filing for 65 to 70 lakh taxpayers.

The GSTN will handle:

1. Invoices

2. Various returns

3. Registrations

4. Payments & Refunds

What is the GSTIN?

The Goods and Service Tax Identification Number (GSTIN) is the unique number each taxpayer will receive once

they have registered on the common portal. It is based on a taxpayer’s PAN.

What is GST Registration

In the GST Regime, businesses whose turnover exceeds Rs. 40 lakhs (Rs 10 lakhs for NE and hill states) is

required to register as a normal taxable person. This process of registration is called GST registration.

Who Should Register for GST?

1. Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)

2. Businesses with turnover above the threshold limit of Rs. 40 Lakhs (Rs. 10 Lakhs for North-Eastern States,

J&K, Himachal Pradesh and Uttarakhand)

3. Casual taxable person / Non-Resident taxable person

4. Agents of a supplier & Input service distributor

5. Those paying tax under the reverse charge mechanism

6. Person who supplies via e-commerce aggregator

7. Every e-commerce aggregator

8. Person supplying online information and database access or retrieval services from a place outside India

to a person in India, other than a registered taxable person.

GST Composition Scheme

Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid

of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any

taxpayer whose turnover is less than Rs. 1.0 crore. (CBIC has notified the increase to the threshold limit

from Rs 1.0 Crore to Rs. 1.5 Crores).

Who can opt for Composition Scheme A taxpayer whose turnover is below Rs 1.0 crore* can opt for Composition Scheme. In case of North-

Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.

As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of

ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the

1st of Feb, 2019. Further, GST Council in its 32nd meeting proposed an increase to this limit for service

providers on 10th Jan 2019*.

Turnover of all businesses registered with the same PAN should be taken into consideration to calculate

turnover.

(*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.)

*Update as on 10th Jan 2019 As per 32nd GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax

Scheme, and the Government has set the threshold turnover for service providers at Rs. 50 lakhs to be eligible

for this scheme.

Who cannot opt for Composition Scheme

The following people cannot opt for the scheme-

1. Manufacturer of ice cream, pan masala, or tobacco

2. A person making inter-state supplies

3. A casual taxable person or a non-resident taxable person

4. Businesses which supply goods through an e-commerce operator

What are the conditions for availing Composition Scheme?

The following conditions must be satisfied in order to opt for composition scheme:

1. No Input Tax Credit can be claimed by a dealer opting for composition scheme

2. The dealer cannot supply GST exempted goods

3. The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism

4. If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries,

etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out

of the scheme.

5. The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard

displayed prominently at their place of business.

6. The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by

him.

How can a taxpayer opt for composition scheme?

To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online

by logging into the GST Portal.

This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for

Composition Scheme.

How Should a Composition Dealer raise bill?

A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax from

their customers. They need to pay tax out of their own pocket.

Hence, the dealer has to issue a Bill of Supply.

The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of

the Bill of Supply.

What are the GST rates for a composition dealer?

Following chart explains the rate of tax on turnover applicable for composition dealers :

What are the returns to be filed by a composition dealer?

A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also, an

annual return GSTR-9A has to be filed by 31st December of next financial year*.

*(Update as on 22nd December 2018: Due date for filing GSTR-9, GSTR-9A and GSTR-9C is extended till 30th

June 2019 by CBIC for FY 2017-18)

What are the advantages of Composition Scheme?

The following are the advantages of registering under composition scheme:

1. Lesser compliance (returns, maintaining books of record, issuance of invoices)

2. Limited tax liability

3. High liquidity as taxes are at a lower rate

What are the disadvantages of Composition Scheme?

Let us now see the disadvantages of registering under GST composition scheme:

1. A limited territory of business. The dealer is barred from carrying out inter-state transactions

2. No Input Tax Credit available to composition dealers

3. The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.