Recently, only 10 percent of total taxpayers, qualified under the new tax regime, have opted for the composition scheme. As a result of this lukewarm response, the government has determined to re-open the registrations for small businesses.

“We (GST Council) have decided that those who have migrated as well as new (taxpayers) can up to September 30 migrate further to the composition scheme,” said Finance Minister Arun Jaitley said at the latest meeting of the GST Council

The composition scheme is another way of taxation which permits the small businesses, whose annual turnover is less than INR 75 lakhs, to pay the taxes at a reduced rate while decreasing the overall compliance cost. However, in nine states which include, but aren’t limited to, Arunachal Pradesh, Nagaland, and Tripura, the revenue threshold is restricted to INR 50 lakhs for the dealers.

This re-opening of registrations for the composition scheme clearly indicates the government’s intentions to bring all 3 crore taxpayers under the umbrella of the new indirect tax regime. In the current scenario, more than 72.5 lakh VAT, excise, and service tax payers have migrated to GST which came into force on July 1. The new taxation system has approximately received 21 lakh new registrations which increased the total number to 93 lakh.

A composition dealer is permitted to pay the taxes at a prescribed percentage of the total turnover of the business on a quarterly basis as an alternative to paying the taxes at a normal rate. Under this particular scheme, the traders, manufacturers, and restaurants can pay the charge at 1, 2 and 5 percent, respectively.

This will lead to a reduced burden of compliance on taxpayers as they will be required to file the returns once in every quarter against the monthly filing of returns which the normal taxpayers need to submit. However, these dealers can’t reap the benefit of input tax credit like the usual taxpayers under GST.  

As per the officials of the Finance Ministry, the government received a muted response from the dealers as they weren’t aware about the benefits being offered by this scheme.