26-May-2020 GST Compliances and Benefits Accorded to MSME’s Part II

Here's the continuation of Part I of GST compliance and benefits accorded to MSME’s 

The GST compliances and benefits accorded to MSME’s are explained herein below:

The MSME’s have been accorded with various benefits under GST by the Government in terms of compliance reliefs given in the form of threshold exemptions, Composition levy schemes, Quarterly filing of the GST returns etc. which are being explained in this article. 

4)    Input Tax Credit for MSMEs

In GST law all eligible registered persons are entitled to take credit of inputs, input services and capital goods subject to certain conditions & restrictions.

After 01.02.2019 eligible registered person can take credit of following,

Ø  Motor vehicles having approved seating capacity of more than 13 (  including driver), vessels and aircrafts (subject to being used for specified purposes).

Ø  Services of general insurance, repair and maintenance in respect of said motor vehicles, vessels and aircraft subject to used for purpose specified therein.

Ø  Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.

There are certain provisions in GST law which allow taxpayer to take input tax credit when composition dealer switches over to normal taxpayer & in cases where a person is  supplying  exempted goods, if such goods become taxable.

5)    Composition Scheme

As per provisions of CGST Act, an eligible registered person, whose aggregate turnover in the preceding financial year did not exceed Rs. 1.5 crore can opt for composition scheme. 

Salient features of Composition Scheme ( for Goods)

Ø    Composition scheme (attracting GST rate of 2%, 5% and 1% for manufacturers, restaurants and trader dealers respectively)

Ø    Registered person should not be engaged in making any supply of goods which are not leviable to tax under this Act;

Ø    Registered person should  not be engaged in making any inter-State outward supplies of goods. 

Ø    Registered person  should not be engaged in making any supply of goods through E-Commence.

Ø    Registered person can neither be a casual taxable person nor a non-resident taxable person:

Ø    Registered person cannot avail any input tax credit.

Ø    Registered person can supply  services of value not exceeding 10% of the value of turnover  of goods or Rs. 5 Lakhs whichever is higher.

Ø    Registered person cannot collect tax from its customer and cannot issue a Tax Invoice 

Salient features of Composition Scheme ( for Service Providers wef 01-04-2019)

               Ø   A Composition Scheme has been separately provided  for suppliers of Services (to those who are not eligible for the presently available Composition Scheme).

              Ø  Composition tax rate for eligible service providers is  6% (3% CGST + 3% SGST)

              Ø  Available to service providers having an Annual Turnover in the preceding financial year up to ₹ 50 Lakhs.

              Ø  Should not be engaged in making any supply which is not leviable to tax under the said Act;

              Ø  Should not be engaged in making any inter-State outward supply;

              Ø  Should not be a casual taxable person nor a non-resident taxable person;

              Ø  Should not be engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52;  

Due Date of tax payment & GST return under Composition scheme  

After the various concessions provided to the Composition taxpayers, now w.e.f. FY 19-20  the Composition taxpayers can  pay self- assessed tax on quarterly basis by 18th day of the month succeeding such quarter in Form CMP-08 & file a single  return in form GSTR-4 by 30th April following the end of such financial year. 

Conclusion

The micro, small and medium enterprises (MSMEs) sector is of special significance for the Indian government, expecting it to offer higher employment opportunities by 2022. In line with the commitment to MSME sector, relaxations have been or are being implemented for them. As MSMEs become accustomed to a larger compliance climate, a better level of preparedness and discipline in conducting business will gradually be a part of operation. With the government’s commitment to strengthen MSMEs on all fronts including GST, it is expected that the current challenges would be stabilized and the industry gradually take a positive turn to fulfill the nation’s vision. 

Disclaimer

The above article is based on our understanding of the law and regulations prevailing as of the date of this memorandum. Accordingly, any change or amendment in the law or relevant regulations would necessitate a review of our comments and recommendations contained in this article.

We shall not be liable to any person including the beneficiary for any claim or demand for damages or otherwise in relation to this article or its contents. 

Please feel free to write to us on Pratik@apmh.in / info@apmh.in for any further queries on the above article.