GST's Composition Scheme Decoded

It is highly important to understand and recognize every minute detailing of policy implications. In the case of GST, this becomes even more critical. Emphasizing on one such issue, in GST, industry experts came together and highlighted that the composition scheme is provided up to a turnover of Rs. 1.5 Crore has been discriminated against the supplier of services other than restaurants as it has not been made applicable to them. As a result large number of Micro & Small Enterprises who are suppliers of services such as Automobile Repair Centers, Transformer Repairs, Air conditioner Equipment Repairs and many more services which are defined/identified as Micro & Small Enterprises by the Ministry of MSME, Govt. of India as per the MSMED Act 2006 are not allowed to get the benefits of Composition Scheme under the GST.

As per the statistical data of MSME’s published in Annual Report of MSME’s in India 60-70% of MSME’s are in Service Sector. Almost all of them are not getting the benefit of the Composition Scheme in GST.

On one account when MSME in Service Sector buy goods from Composition supplier, they will not be able to take ITC and on the other account they will have to charge 18% on their “composite supply”. The small composite supplier will not only have to follow the detailed accounting and paperwork but his sales will be expensive by 18% putting a strain on his already Short Working Capital, especially when selling to Government Departments. This would be absolutely unfair and discriminatory.

Mr Sanjay Kaul, Chairman Taxation & Banking Committee of Indian Industries Association (IIA) represented the issue in a Meeting on GST and Credit related issue pertaining to MSMEs held on 14.08.2018 at Udyog Bhawan, New Delhi under the Chairmanship of Secretary Ministry of MSME Government of India .