Composition scheme: Few takers in Union territories of India
Dealers and distributors of union territories of India are not excited with the Composition scheme under the GST Act. Even the traders who have earlier opted for the composition scheme are looking to change their registration as a normal dealer. Total No of registered composition dealers in India are 19 lacks were as only 19500 of these are registered in Delhi, other union territories have similar insignificant numbers. The main reason behind such a trend is that a composition scheme restricts dealer from making an inter-state trade also it restricts them from taking the credit on inward supplies(Input Tax credit).
It should be noted that to give relaxation to the small taxpayers under the GST system, a Composition Scheme under section 10 of the CGST Act 2017 has been provided. Under the scheme, the dealers are required to pay 1% tax on their taxable supplies without taking any input credit. Conditions mentioned in Section 10 are depicted below:
It should be noted that a large proportion of traders in Union territories such as Delhi are service providers and hence are out of the composition scheme (Only the restaurant service provider can opt for composition scheme). Many traders’ deals in B2B and Inter-state supplies, restriction on inter-state trade discourage traders from opting for composition scheme. It has been noted that many dealers have shifted from composition scheme to normal in the FY 2018-19 because their turnover has crossed 1.5 Cr for the year. The recent announcement by the GST council exempting general traders of upto 1.5 Cr from the requirement of filling quarterly return has further dampened the interest of traders towards composition scheme.