GST provisions for Small Tax Payers or MSME Sector
Before understanding GST provisions for Small Tax Payers, lets understand meaning of an MSME.
In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are depicted below:
| Manufacturing Sector | Service Sector | ||
| Enterprises | Investment in plant & machinery | Enterprises | Investment in equipment |
| Micro Enterprises | Does not exceed Rs. 25 Lakh | Micro Enterprises | Does not exceed Rs. 10 Lakh |
| Small Enterprises | More than Rs. 25 Lakh but does not exceed Rs. 5 Crore | Small Enterprises | More than Rs. 10 Lakh but does not exceed Rs. 2 Crore |
| Medium Enterprises | More than Rs. 5 Crore but does not exceed Rs. 10 Crore | Medium Enterprises | More than Rs. 2 Crore but does not exceed Rs. 5 Crore |
IS GST REGISTRATION MANDATORY FOR REGISTERED MSME?
To understand requirement of GST for MSME Sector, we must first understand who should register for GST as per law. As per GST law, following conditions need to be fulfilled for transacting with GST :
- GST being a tax on supply, every supplier in the State or Union Territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial exceeds prescribed amount of threshold exemption limit.
-
- The threshold limit of aggregate turnover for exemption from registration and payment of GST for suppliers of services is Rs. 20 Lakh (Rs. 10 Lakh for States of Manipur, Mizoram, Nagaland and Tripura).
- The threshold limit of aggregate turnover for exemption from registration and payment of GST for suppliers of goods is Rs. 40 Lakh (Rs. 20 Lakh in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand) w.e.f. 01.04.2019.
- GST Acts also provides for compulsory registration of certain suppliers even if their aggregate turnover is below the threshold limit. Some of these suppliers are;
(i) Persons making inter-State taxable supply of goods;
(ii) Casual taxable persons making taxable supply;
(iii) Persons who are required to pay tax under reverse charge;
(iv) Persons making taxable supply on behalf of another taxable person whether as an agent or otherwise; etc.
How MSME Sector comply with GST ?
As a registered identity, each business unit registered as MSMEs working in format of proprietorship, partnership or company have to apply for a GSTN Number. The GSTN number as provided would be used in each and every business transaction specifying the flow of goods and services, GST collected and paid etc.
For an MSME to register under GST have to apply on GST online portal along with following documents:
1. Certificate of MSME Registration
2. Existing Service Tax/VAT/CST/Excise Registration details
3. Proprietor PAN details
4. Bank account details opened in name of business.
5. Aadhar details of proprietor
6. Address proof of business ;
7. Other documents as specified by government.
GST provisions for Small Tax Payers : Composition Levy Scheme for MSME Sector:
Composition levy scheme in GST is an alternative method of levy of tax designed for small and medium taxpayers whose turnover is up to the prescribed limit. It is very simple, hassle free compliance scheme for small taxpayers. It is a voluntary and optional scheme. A person opting to pay tax under composition levy scheme can neither take credit of taxes paid on inputs nor it can collect any tax from the recipient. The salient features of composition levy scheme are:
(i) A registered taxable person, whose aggregate turnover does not exceed Rs. 1.50 Crore, as a supplier of goods (Rs. 75 Lakh for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand) in the preceding financial year may opt for this scheme.
(ii) However, a supplier of services only (or services and goods together) with annual turnover up to Rs. 50 Lakh may opt for composition scheme and the rate of GST applicable for such supplier would be 6%.
(iii) Ice cream, pan masala and tobacco manufacturers cannot opt for the GST composition levy scheme.
(iv) A taxpayer registered under composition levy scheme has to pay an amount equal to certain fixed percentage as tax to the government. The tax amount cannot be collected in the form of GST from the customers. The rate of tax under composition levy scheme is as given below:
(a) 1% of the turnover in the State or UT, in case of eligible manufacturers.
(b) 1% of the turnover of taxable supplies in the State or UT, in case of traders.
(c) 5% of the turnover in the State of UT, in case of supplies referred to in para 6(b) of Schedule II (i.e. restaurant services and works contracts services).
(d) 6% of the turnover of taxable supplies in the State or UT, in case of suppliers dealing in services only or goods and services together.
(v) The tax has to be paid on quarterly basis. Such taxpayer does not have to maintain elaborate accounts and records and instead of two monthly statements and a return (which a normal taxpayer has to file under GST), the composition taxpayers need to pay the taxes quarterly based on a declaration.
They need to file only one return now on annual basis.
(vi) A taxable person opting for the scheme has to issue bill of supply as he is not eligible to issue taxable invoice under GST. He has to mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of every bill of supply issued by him.
Input Tax Credit (ITC) : A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switched over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed. Also, as the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme cannot avail credit.
Invoice :
A person paying tax under the composition scheme can issue a bill of supply in lieu of tax invoice. The person exercising the option to pay tax under section 10 shall comply with the following other conditions , namely: –
a) he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and
b) he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
Maintenance of Accounts by MSME Sector :
Following records are not required to be maintained by a supplier who has opted for composition scheme as per Rule 56(2) & (4) of the CGST Rules,2017 :
1. Commodity wise Stock account
2. Accounts containing tax details including ITC
Reverse Charge Mechanism(RCM) :
Composition Taxpayers will be liable to pay tax under RCM in relevant cases at normal tax rates. No credit will be allowed of tax paid.
GST provisions for Small Tax Payers : Penal Consequences
If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for determination of tax and penalty.
For Regular Updates Join : https://t.me/Studycafe
Tags : GST, GST Return, MSME
The post GST provisions for Small Tax Payers or MSME Sector appeared first on Studycafe.
from Studycafe https://ift.tt/2MtWVHG
No comments:
Post a Comment