What is a composite dealer in GST?

GST Act requires multiple compliances in relation to tax payment, tax return filing, invoicing etc. However, the dealers that work at a smaller level may have a limited turnover and may not have the required resources to comply with the complicated provisions. Thus, the composition scheme has been introduced to minimize the burden of tax compliance for small taxpayers. The dealer who opts for Composition Scheme u/s 10 of CGST Act is known as a Composite dealer.

The scheme is available to those whose aggregate turnover in a financial year does not exceed Rs.75,00,000. However, the scheme is available only to the supplier of goods and not a supplier of services (except restaurant service). It is also not available to persons who supply goods outside the state. This scheme is optional.

What are the Benefits of the Composition Scheme?

  1. Minor compliance (return, maintenance of books for records, issuing invoices)
    Limited tax liability
  2. High liquidity as taxes are at a lower rate
  3. The dealer has to pay a fixed percentage of turnover as tax and need not worry about complicated tax calculations.
  4. They have to file quarterly returns and not monthly returns like a normal taxpayer.

What are the drawbacks of the Compilation Scheme?

  1. A limited territory of the business. The dealer is not allowed to perform interstate transactions
  2. No entry Tax credit available to the composition dealers
  3. The taxpayer will not have the right to deliver released goods or goods through an e-commerce portal.
  4. The dealer cannot go for the inter-state supply of goods.
  5. The dealer is not entitled to Input Tax Credit.
  6. The dealer cannot charge GST in their invoice and thus cannot recover the tax from the buyer.

1) Who can opt for Composition Scheme?

  • Businesses with annual turnover up to Rs 1.0 crore* can opt for composition scheme.
  • Turnover of all businesses with same PAN has to be added up to calculate turnover for the purpose of composition scheme.
  • Only Manufacturers of goods, Dealers, and Restaurants (not serving alcohol) can opt for composition scheme.
  • The threshold limit for opting into a composition scheme is recommended for an increase to Rs. 1.5 crores but yet to be notified

2) What is the tax rate applicable to the distributor of the compositions?

Please use the chart below to understand the tax rate on turnover applicable:

Tax Rate

3) Is it obliged to pay taxes under the Reverse Collection Mechanism covered by the Compilation Scheme?

  • A component dealer must pay a tax under the Reverse Collection Mechanism whenever applicable.
  • The rate applicable to the supply is the rate at which the GTS is to be paid. This means that the rate according to the composition scheme should not be used for the purpose of reverse collection.
  • Also, no ITC is available for a tax paid under a reverse charge for a dealer of a composition.

4)  I buy goods from an unregistered dealer. Do I need to pay tax?

  • A normal rate tax should be paid for purchase by an unregistered dealer only for the months of July and August 2017. Since September, there is no need to pay taxes on these procurements.
  • ITC is not available for a tax paid under a reverse charge.

5)  Do I need to pay IGST interstate purchases by attracting a reverse charge?

  • IGST should not be paid by the dealer to the composition. The dealer is obliged to pay tax under a reverse charge, the import of a service or the purchase from an unregistered dealer must pay only CGST and SGST.

6) How should the Tax amount be calculated?

A composition dealer is required to pay tax at a specific rate on total sales. Also, the dealer has to pay tax under reverse charge on specified purchases, purchase form unregistered dealer and import of services.

This means that Total GST Payable =

Tax on supplies (net of advance and goods returned)

+ Tax on B2B transactions where Reverse Charge is applicable

+ Tax on B2B purchases from Unregistered suppliers

+ Tax on Import of Services

The rate of Tax on transactions under Reverse Charge, purchase from an unregistered dealer and import of services will be at normal rates, i.e. the rates applicable to the supplies. Rates under Composition Scheme are applicable only to sales of a composition dealer.

7) What are the conditions for using the input credits of shares that lie at the time of transition?

The following are the conditions that must be decided by the taxpayer to use the credits for entry at the time of the transition from the scheme for drawing in a normal scheme:

  • Input or merchandise will be used to be taxed.
  • The CENVAT loan could be required in the previous model, but could not claim to be under the compilation scheme.
  • ITC has the right to use it under the GTS regime.
  • The taxpayer has invoices of input taxes paid for those goods.
  • Invoices should not be older than 1 year from 1 July 2017 (ie not dated before 1 July 2016)

8) What are the returns for the Composer Distributor?

  • A taxable person is obliged to submit only one report, that is, GSTR-4 on a quarterly basis and an annual return to FORM GSTR-9A.
  • Also, automatically prepared details are not available for the composer dealer for the fourth and ninth months of September – October and October – December. This means that all sales details should be entered manually by the Composition Dealer.

9) What will happen if you cancel the composition scheme in the middle of the year?

When a dealer selects a compiled scheme, all normal rules apply from the date of removal.

For example, the dealer is selected from the composition on October 15, 2017. This means that the dealer will have to submit two GSTR-4 for July-September and October (15 days). The dealer will also have to submit GSTR-1, GSTR-2 and GSTR-3 for the period from October 2017 (sale from October 15 to the end of the month)

 

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Misconceptions on TDS – Tax deducted at source

Misconceptions about TDS (Tax denied at source)

I recently published articles on TDS for periodic deposits and TDS for the withdrawal of the EPF. I received lots of TDS comments/questions about the amount of the source. I have noticed that there are many misconceptions about TDS.
Many investors think that TDS refusal completely removes their tax liability. Another misrepresentation is – “Without TDS means, without a tax obligation“.

What is TDS?

The tax amount of the source or TDS is a tax collection process from the tax department. This involves collecting revenue at the very source of income. It is an essentially indirect tax collection method that combines the concepts of “pay as you earn” and “collect as you earned.”

Example: You reserve a bank fixed deposit for Rs 3 Lakh for 1 year @ 10% per annum. You will earn an income of interest of 30,000 pounds per year. The bank will deduct TDS at a rate of 10%, for example, 3,000 rubles (10% from 30,000 rubles) and deposits of 3,000 rubles with the income tax department (on behalf of you). The bank issues you a TDS certificate (Form 16A) that reflects this refusal.

Misconceptions about TDS

No TDS means any tax liability

For example – If an employee withdraws his EPF money before 5 years of service and if the amount of withdrawal is less than 30,000 Rs, then the TDS is not applicable.

But this does not mean that the withdrawal is tax exempt. It is only that there is no need for the employer (Deductor) to subtract the TDS of these types of withdrawals. However, the obligation to pay taxes (if any) to this amount of EPF lies with the employee.

TDS selection completely removes the tax liability

  • It is a mistaken opinion that, if the employer takes away the TDS, you do not have to worry about filing your tax return. Your employer takes TDS only on income from a salary, and you may have income from other sources, and you must include those in the tax returns.
  • Another misconception is – “No additional income tax will be payable if taxes are already deducted (TDS) of income“. In fact, depending on the nature of the income, the TDS rates vary. For salaries, employers adjust the rate so that the employee’s entire tax liability is deducted by the end of the year. On a fixed deposit interest, banks charge TDS to 10 per cent. But if the deposit holder does not provide his permanent account number, the bank’s tax deductible at 20 per cent.

TDS and Income tax Slab

 

  • Most of the older citizens submit a Form 15H template to avoid TDS. In many cases, older citizens feel if they do, they are not obliged to pay taxes. But if you have two or three fixed deposits in separate banks and submit a Form 15G or 15H form to all banks, you will need to pay a tax if the total interest rate on all fixed deposits exceeds the income limit.

Latest TDS Rates FY 2018-19 (AY 2019-20) 

Below are the latest TDS rates applied for the financial years 2018-19.

Latest TDS Rates Chart For Financial Year

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10 Credit Card charges that you should be aware of!

10 Credit Cards You Must Know About It!

I provided a free credit card with a phone call to enjoy the range of benefits and rewards that I enjoyed. But as the proposal seemed to me, I decided to take part in it. But to my surprise, a lot of additional charges came in later, which did not inform me about it before.

I know a lot of people who have told me this over and over again. While getting a credit card in a drop of a hat is a good feeling, the best offer may not always be available.

Important credit card list:-

Below are some important credit card charges you should be aware of;

An annual fee – also known as a partnership or membership fee – is a charge that applies to credit card use. In many cases, it may be cancelled for the first year, but essentially from the next one on a monthly basis. It may range from Rs 500 to Rs 3000 for one year. For example, the annual cost of an HDFC Regalia credit card is Rs 2500, while Rs 2000 is for a credit card signed by ICICI. * The annual fee for the first year is called the cost of joining.

Interest – The charges charged by the bank to borrow money are known as benefits. This bank will pay it if you fail to pay a significant amount within the specified period. Interest rates are about 3% per month and 36% -38% per annum on costs.

Cash Advance Fee – The amount the bank has received to receive a cash credit card. The transaction costs may be based on a percentage (approximately 2.5%) of the cash advance, or maybe a flat on each transaction fee. Apart from this, the cost of profit at a rate of 24- 46% per annum also applies to it, just from the day before the payment of money.

More than a limited fee – The cost of charging excessive credit cards. The real fact here is that even if you exceed your permissible limit only through Rs 1, you will be responsible for paying over Rs 500 or Rs 500 in accordance with the issuer’s card rules.

Low cost – The cost of your charges on paying the amount payable at the time is known as late cost. If you are late for more than 90 days, you will certainly receive a late payment. The late cost of frequent payments is different based on the amount payable. If it’s anywhere from 500 to 20,000 Rs, it may cost from 100 to 600 Rials. However, for amounts exceeding Rs. 20,000, the cost may range between Rs. 600 and Rs. 800.

Bank Credit Card Charges

Many of you do not already know about these allegations, so they have a basic idea about them instead. You know exactly before asking for a card from Telekaller or the executive director. Understanding these costs and costs of an armed credit card helps you to maximize the benefits of your card and use it with caution.

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