Composition Dealers to be prohibited from charging GST from Consumers

Composition Scheme opting- Taxscan

The Central Government is likely to mandate composition dealers and service providers to declare their GST registration status in invoices to ensure that they do not charge any tax from buyers. This is to ensure relief and protection to the consumers.

The measure, once implemented, would check the widespread practice of composition dealers of charging GST from purchasers and not depositing it with the exchequer, an official said to ET.

According to the report, the revenue department is also planning to launch a campaign to educate consumers that the dealers opting for composition scheme are not required to charge the goods and services tax (GST) from purchasers, the official said.

The present GST Composition Scheme requires the traders and manufacturers to pay only 1 percent GST on goods which otherwise attract a higher levy of either 5, 12 or 18 percent. Such dealers are also not permitted to charge GST from the purchaser. Of the 1.17 crore businesses registered under GST, about 20 lakh have opted for composition scheme.

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“It has come to the notice of the government that a large number of composition dealers are levying GST at higher rates and not depositing it with the government,” the official told PTI.

The Central Board of Indirect Taxes and Customs (CBIC), is considering a proposal as per which, the businesses will have to mandatorily mention in the invoice generated by them that they are composition dealers and, hence, are not required to charge GST.

“Simultaneously, we will educate consumers that they should not pay GST while buying goods from composition scheme dealers,” the official said.

To ease compliance burden for small businesses, the GST law provides for composition scheme under which traders and manufacturers with an annual turnover of up to Rs 1 crore can pay 1 percent GST. This threshold will increase to Rs 1.5 crore from April 1.

The 32nd meeting of the GST council held at Delhi last week permitted the service providers and those dealing in both goods and services with a turnover of Rs 50 lakh to opt for composition scheme.

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