GST Compliance and Challenges for Composite Dealers
Any business with an annual turnover less than 1.5 Cr, and involved in trading, manufacturing or owns a restaurant can get registered under the Composition Scheme. Composite dealers have to file their GST returns on a quarterly basis.
Although some GST laws are relaxed for composite dealers when compared to regular dealers, yet there are a few compliance requirements which can be challenging for composite dealers.
Calculating tax liability correctly as a composite dealer in GST era
If you are a composite dealer under GST, you must be aware that a flat tax rate is applicable on your sales turnover for the calculation of tax liability. But now, as per the Commercial Tax Department, tax liability should be calculated on taxable turnover and not on the overall turnover.
To get your taxable turnover right –
1) You have to categorize each item in your books as taxable, nil, or zero rated.
2) Then you have to apply the flat tax rate on the total taxable turnover to calculate the amount.
Consider a case, where you have already prepared the data for the January-March quarter. You now need to categorize each item. How will you do this? What if you end up paying more?
Are your bills as per GST format?
As a composite dealer under GST, you have to issue ‘Bill of Supply’ when you make a sale, instead of a tax invoice. The bill must be titled ‘Bill of Supply.’ Secondly, you cannot charge GST in your bills. You need to ensure that your bills show only the value of items and additional charges, and no taxes as required for compliance.
Preparing GSTR-4 correctly before filing
Composite dealers have to file GSTR-4 on a quarterly basis. In GSTR-4, you are required to provide –
1) Invoice details for all purchases made from registered dealers
2) Purchases attracting reverse charges
3) Purchases made from unregistered dealers
4) Import of services
5) Details of credit notes and debit notes which have been issued or received, either from registered or unregistered dealers have to be provided separately.
Also, you have to declare advance amounts which you have received with bifurcation based on tax invoices generated either in the current tax period or previous tax period.
For transactions that attract reverse charges, you need to calculate their taxes accurately. All these details must appear in GSTR-4 correctly before you file the return.
Challenges in generating e-Way Bills for composite dealers
An e-Way Bill is required for transporting goods worth more than Rs. 50,000/-. While some States have made this a mandate for intra-state movement of goods, some have made this compulsory for inter-state movement of goods as well. The e-Way Bill is expected to be implemented from 1st April all over India.
It can be a challenge to keep track of transactions which qualify for e-Way Bills. It is also a cumbersome process to re-enter all invoice details once again in the e-Way Bill portal to generate e-Way Bills. It is also difficult to identify all the transactions for which e-Way Bills are yet to be generated. How will you filter out such transactions?
Although composite dealers in GST era, have to file their returns on a quarterly basis, they still have to ensure that their day-to-day transactions are recorded correctly so that they can file their GSTR-4 returns without any hassles and stay GST compliant.
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