Many startups, Small and Medium Enterprises (SME’s) keep toiling between tax regimes to comply with their provisions. To clarify their issues the Government of India has finally made operational it’s much awaited Compositional Scheme for 2017-18.
Under the scheme, businesses only dealing in goods and restaurant sector taxpayers whose annual turnover is below Rs 75 lakhs ( In case of North-Eastern states and Himachal Pradesh, the limit is Rs 50 lakh) may opt for this. Service providers will be kept outside composition scheme.
A registered taxpayer also registered under Composition scheme will pay tax at a rate not more than 1% for manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of turnover.
Benefits of Composition Scheme:
- Lesser compliance (returns, maintaining books of record, issuance of invoices)
- Limited tax liability
- High liquidity as taxes are at a lower rate
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