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Businesses with turnover of up to 1.5 Crores or lesser can opt for the Composition Scheme, as per the GST Council. Only manufacturers of goods, dealers, and restaurants (not serving alcohol) can opt for the scheme. These types of businesses are not required to file their GST returns on a monthly basis. Rather, they have to file GST CMP 08 on a quarterly basis, in which only summary-level details are required. However, composite dealer cannot claim Input Tax Credit on their purchases.
If you are a composite dealer, technology must help you stay GST compliant, while making your everyday business affairs easy to manage.
Under the composition scheme, a flat rate of 1% is applicable for a trader and manufacturer. You must be able to configure these tax rates in your business software and get tax liability figures at the end of the quarter in a single click.
Another challenge that technology can help you deal with is when the GST Council announces any changes in the tax rates going forward. Technology must give you the flexibility to accommodate these changes. Also, it should maintain a history of tax rates so that tax liability gets calculated more accurately.
For example, assume that the tax rate is 1% for the period between 1st April to 15th May. The tax rate gets changed to 1.5% from 16th May up to June 30th. Technology must ensure that your total liability for the quarter April to June, accounts in both these rates along with their applicable dates.
As per the GST law, a composite dealer’s tax liability is calculated based on pre-defined tax percentage on taxable turnover. The taxable turnover applies only on supplies of taxable goods. Goods can be categorized either as under taxable, or nil or exempt categories.
Firstly, technology should categorize the goods, and secondly, segregate the taxable turnover and ensure that you pay the right amount of tax.
As mentioned earlier, if you are a composite dealer you will not be able to claim Input Tax Credit on your purchases. At the same time, you also have to pay taxes on purchases on reverse charge is applicable. We will explain both the cases to you.
Firstly, for purchases made from regular dealers, you will be charged CGST and SGST for local purchases, or IGST in case of purchases made from other states. These taxes have to be accounted in as cost since you cannot claim any Input Tax Credit on these taxes. Also, these costs have to be added to the purchase cost of goods so that you can clearly make out the cost for the particular good.
Secondly, for purchases on which reverse charge is applicable, you have to calculate taxes on such purchases and accordingly factor in taxes and raise your tax liability. Technology can help you in handling such purchases and appropriately calculate your tax liability.
As a composite dealer, in case of specified purchases and import of services, you are liable to pay Reverse Charge.Technology should help you in generating these transactions and accordingly raise your tax liability so that you end up paying the right taxes.
An e-Way Bill is required for transporting goods worth more than Rs. 50,000/- within states wherever applicable, and in some cases even for inter-state transactions. To obtain e-Way Bills, you need transaction level and transportation level details. You will need to record these details in your business software to create invoices, then log in to the e-Way portal and fill in these again along with additional details of transportation, to get the e-Way Bill.
With the right technology, you must be able to avoid the repetitive activity and reduce the chances of manual errors. Your software must generate a JSON file of the invoice which can be directly uploaded on the portal to generate the corresponding e-Way Bill.
As a composite dealer, you cannot charge tax on a sale, and thereby have to generate a ‘Bill of Supply’ instead of an invoice. Also, you need to file GST CMP 08 on a quarterly basis and accordingly pay your tax liabilities.
It can become challenging to segregate taxable supplies, calculate taxable turnover, and add tax liabilities based on Reverse Charge. Any manual error could lead to the rejection of your returns or result in you paying the wrong amount of tax.
Technology should help you to calculate the right amount of tax during the creation of transactions, generate proper Bills of Supply, and calculate the overall tax liability. It must help you to file your GST CMP 08 returns in the right way.
To make GST CMP 08 filing easy for you, technology should help you to generate the form in JSON directly, which can be uploaded to the GST Portal for filing the return.
e-Invoice from 1st October 2022 for Businesses with Turnover Exceeding 10 Crore
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