GST COMPOSITION SCHEME RULES – RULE 3 – COMPOSITION LEVY
The Goods and Services Tax (GST) Regime in India, being a significant change to the indirect tax system was design with utmost diligence. As we look at GST as a single tax for the entire country, it is expected to deliver transparency and non-evasion to a greater level. However, when it comes to the perspective of compliance it was an obstacle of the small businesses to cope up with the compliance requirements. Thus the need for relaxation to small businesses was realized and was provided with a voluntary scheme with simple and easy compliance, i.e. Composition Scheme.
Rule 3 of the Composition Scheme is the subject of this article. It deals with the Intimation for Composition Levy. But before that we need to have a basic understanding about the composition scheme. So without going into other concepts we will just look at the basic meaning of the scheme and get in Rule 3.
A Composition scheme under GST Law gives an option to small businesses under which they can opt to pay a fixed percentage of turnovers as tax in lieu of normal tax and be relieved from the detailed compliance of the GST law.
Keeping the above line, the meaning of this scheme can be construed basically as the Composition scheme is basically for benefit of the small businesses. This is to bring relief to small businesses form the burden of compliance provisions under the law. Thus, an option has been provided where they can opt to pay a fixed percentage of turnovers as fees in lieu of tax and be relieved from the detailed compliance.
It is also necessary to be aware that the registered person under composition scheme is not permitted to collect tax. It means that a composition scheme supplier cannot issue a tax invoice. Similarly, a customer who buys goods from registered person who is under composition scheme is not eligible for composition input tax credit because a composition scheme supplier cannot issue a tax invoice.
Rule 3 – INTIMATION OF COMPOSITION LEVY
This rule predominantly deals with intimation by the registered person opting to pay tax under the Composition Scheme.
Rule 3(1) – Provision relating to Taxpayers Registered under the Existing Law
This sub-rule provides that any person who has been granted registration on a provisional basis under Rule 24 (i.e Migration/ Enrollment of Taxpayers Registered under the Existing Law) and who opts to pay tax Composition Scheme, shall electronically file an intimation to collect tax under the Composition Scheme. The intimation shall be in FORM GST CMP-01, duly signed, or verified through electronic verification code on the common portal, either directly or through a Facilitation Centre.
This provision was more of a transition provision for the taxpayers registered under the earlier tax laws. Further, the intimation above mentioned was required to be made prior to the appointed day, but not later than thirty days. Moreover the registered person shall not collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day.
Rule 3(2) – Provision relating to Intimation by person applying for registration
This sub-rule provided for the unregistered person, who has applied for registration under the GST Law under the Composition Scheme. This is kind of entry into the composition scheme right from the initial registration itself.
The provisions states that any person who is not registered and applies for registration may give an option to pay tax under composition levy in Part B of the registration form. The intimation shall be made in FORM GST REG-01 and shall be considered as intimation to pay tax under Composition Levy.
Further it laid down the condition that such intimation opting composition levy shall be considered only after the grant of registration to the applicant and his option to pay tax under composition levy shall be effective from the date from which registration is effective.
Rule 3(3) – Provision relating to Intimation by a registered person
This sub-rule provides for the registered person who opts to pay tax under composition levy scheme. As per the provisions the registered person shall electronically file intimation in prescribed form on the Common Portal [www.gst.gov.in], prior to the commencement of the financial year for which said option is exercised.
However the registered persons must undertake the following conditions while exercising such option, wherein the registered person shall furnish the statement for reversal of input credit under special circumstances within 60 days from the commencement of the relevant financial year.
Further, in order to facilitate business Rule 3(A) was inserted lately. As per the Rule 3(A)as a business facilitation measure sub-rule (3A) was inserted to provide that a person who has been granted registration on a provisional basis or who has been granted certificate of registration may opt to pay tax under section 10 with effect from the first day of the month immediately succeeding the month in which he files an intimation in FORM GST CMP-02, on the common portal on or before the 31st day of March, 2018 and shall furnish the statement in FORM GST ITC-03* furnishing the statement for reversal of input credit under special circumstances within a period of [one hundred and eighty days] from the day on which such person commences to pay tax under composition levy scheme.
Rule 3(4) – Provision relating to furnishing details of stock
This provision is in interrelation to the Rule 3(1), where in the any person who filed a intimation shall furnish the details of stock including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts for composition levy. And such details shall be furnished electronic ally on the common portal, within a period of 90 days from the date on which the option for composition levy is exercised. The same shall be in FORM GST CMP-03.
Rule 3(5) – Provision relating to intimation in one place of business is deemed intimation for all other places
This sub-rule provides that any intimation made under sub-rule (1), (3) or (3A) in respect of any place of business in any State or Union territory shall be deemed to be an intimation in respect of all other places of business registered. It is basically principle that the intimated in deemed to made for all the place of business registered on the same Permanent Account Number (PAN).
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