GST: Composition or Regular?

 The Goods and Services Tax Composition Scheme versus the Goods and Services Tax Regular Scheme: Which One Is Best for Your Small Business

As a business owner you need to understand the Goods and Services Tax system. This is important for your small business to pay the amount of tax. The Goods and Services Tax system has two schemes: the Goods and Services Tax Composition Scheme and the Goods and Services Tax Regular Scheme. Choosing the scheme can make it easier for your small business to follow the rules and pay less tax.

The Goods and Services Tax Composition Scheme and the Goods and Services Tax Regular Scheme are two options for your business. We will explain the features and benefits of both the Goods and Services Tax Composition Scheme and the Goods and Services Tax Regular Scheme to help you decide which one is best for your business.

What Is the Goods and Services Tax Composition Scheme

The Goods and Services Tax Composition Scheme is for businesses. Under the Goods and Services Tax Composition Scheme small businesses pay tax. They have to do less paperwork. The Goods and Services Tax Composition Scheme is good for businesses that mainly sell to people in their area and do not have a lot of sales.

Key Features of the Goods and Services Tax Composition Scheme

Eligibility Criteria

To use the Goods and Services Tax Composition Scheme your small business must have sales of less than 1.5 crore rupees per year. The Goods and Services Tax Composition Scheme is available to people who make things sell things and own restaurants. Most service providers cannot use the Goods and Services Tax Composition Scheme.

Tax Rate

The tax rate under the Goods and Services Tax Composition Scheme is lower. People who make things pay 1 percent tax under the Goods and Services Tax Composition Scheme. Restaurants pay 5 percent tax under the Goods and Services Tax Composition Scheme. Traders pay 0.5 percent tax under the Goods and Services Tax Composition Scheme.

Simplified Compliance

Small businesses that use the Goods and Services Tax Composition Scheme have to do some paperwork. It is not too much. They only have to file a tax return every three months under the Goods and Services Tax Composition Scheme.

No Input Tax Credit

Small businesses that use the Goods and Services Tax Composition Scheme cannot get a refund for the tax they pay on things they buy under the Goods and Services Tax Composition Scheme.

Restrictions on Sales

Businesses that use the Goods and Services Tax Composition Scheme cannot sell to businesses that are registered under the Goods and Services Tax Regular Scheme.

What Is the Goods and Services Tax Regular Scheme

The Goods and Services Tax Regular Scheme is for businesses that do not qualify for the Goods and Services Tax Composition Scheme. Under the Goods and Services Tax Regular Scheme businesses have to follow all the rules and file tax returns every month under the Goods and Services Tax Regular Scheme.

Key Features of the Goods and Services Tax Regular Scheme

Eligibility Criteria

Any business that has sales of more than 1.5 crore rupees per year has to register under the Goods and Services Tax Regular Scheme.

Tax Rate

The Goods and Services Tax Regular Scheme uses tax rates that range from 5 percent to 28 percent under the Goods and Services Tax Regular Scheme.

Input Tax Credit

Small businesses that use the Goods and Services Tax Regular Scheme can get a refund for the tax they pay on things they buy under the Goods and Services Tax Regular Scheme.

Compliance Requirements

Small businesses that use the Goods and Services Tax Regular Scheme have to keep records and file tax returns every month under the Goods and Services Tax Regular Scheme.

Interstate Sales

Small businesses that use the Goods and Services Tax Regular Scheme can sell to people in states without any restrictions under the Goods and Services Tax Regular Scheme.

Which Scheme Is Best for Your Small Business

The decision between the Goods and Services Tax Composition Scheme and the Goods and Services Tax Regular Scheme depends on the size of your business and the amount of sales you have. It also depends on the type of sales you make under the Goods and Services Tax system.

Choose the Goods and Services Tax Composition Scheme if:

a. Your small business has sales of less than 1.5 crore rupees.

b. You mainly sell to people in your area under the Goods and Services Tax Composition Scheme.

c. You want to do paperwork and pay less tax under the Goods and Services Tax Composition Scheme.

Choose the Goods and Services Tax Regular Scheme if:

a. Your small business has sales of more than 1.5 crore rupees.

b.  You want to sell to people in states under the Goods and Services Tax Regular Scheme.

c. You want to get a refund for the tax you pay on things you buy under the Goods and Services Tax Regular Scheme.

The Goods and Services Tax Composition Scheme and the Goods and Services Tax Regular Scheme have their advantages. The best choice for your business depends on how you run your business. If you have a business with sales of less than 1.5 crore rupees the Goods and Services Tax Composition Scheme offers lower tax rates and less paperwork. However if you plan to expand your business or get a refund for the tax you pay on things you buy the Goods and Services Tax Regular Scheme may be an option for your business. The Goods and Services Tax Composition Scheme is an option for small businesses that want to keep things simple. On the hand the Goods and Services Tax Regular Scheme is a good option for businesses that want to sell to people in other states or get a refund for the tax they pay on things they buy. You should choose the scheme that's best, for your business.