Composition Scheme: Govt ‘surprised’ over low turnover reported by dealers

Adhia said if the annual turnover of a company is Rs 5 lakh, why would it register under GST. He said the government was not aware about the low sales figures reported by composition scheme dealers. “We didn’t know these statistics, when we increased the limit for availing composition scheme to Rs 1.5 crore. There is no need to do that,” Adhia said.

He further said, “5 lakh businesses showing less than Rs 5 lakh annual turnover. And the average of 7 lakh businesses, was coming to Rs 14 lakh (turnover).”

Businesses with turnover up to Rs 20 lakh are exempt from the GST regime, which kicked in from July 1, 2017. Out of 10 lakh businesses that opted for the composition scheme during the July-September period, about 7 lakh have filed GST returns for the quarter. The GST Council, comprising the Centre and states, in its November 2017 meeting increased the threshold for composition scheme to Rs 1.5 crore and also decided to amend the GST law to raise the statutory threshold to Rs 2 crore. Till then the threshold for scheme was Rs 1 crore.

Under the composition scheme, traders and manufacturers are allowed to pay taxes at a reduced rate of 1 per cent, while restaurants are required to pay tax at 5 per cent rate.

The GST Council, in its meeting on January 18, had focused on anti-evasion measures such as imposition of reverse charge mechanism for composition scheme dealers along with the e-way bill rollout from February 1. The members had discussed tax evasion under the composition scheme. Finance Minister Arun Jaitley had Jaitley said there seems to be “cases of underdeclaration as far as composition scheme is concerned”. “Out of the 17 lakh dealers who have registered themselves under the scheme at 1 per cent rate, the collection for the first quarter has only been around Rs 307 crore. The scheme has not been enthusiastically responded to,” he had said.