Composition Scheme
Composition scheme was essentially introduced for the convenience of small traders. It has an upper hand over the conventional method in a way that it provides lesser tax rates and higher liquidity to small traders. At the same time, the biggest disadvantage of this scheme is that it is restricted to intrastate trade only and traders cannot avail input tax credit. With time, the scheme has evolved and it was assured that the scheme would reach every small trader and they should get benefit of it. Still, there are some unanswered questions which require attention. In this scheme, threshold limit has two compliances e.g. one for all over India i.e. 1.5 crore and second above mentioned nine states i.e. 75 lakhs. It may be due the fact that traders have small businesses in these states. There is also a separate limit for normal states and special states in case of mandatory registration as the normal states’ annual threshold turnover is Rs. 40 Lakhs as compared to special states’ turnover of Rs. 20 Lakhs. This has essentially been done to benefit the customers living in these areas as the implementation would mean the removal of cascading effect and the customers wouldn’t have to pay taxes over the same product again and again.
However, this benefit is not at all in line with the composition scheme as the threshold limit for the special states should have been more than the normal ones in order to provide benefit to the shopkeepers. Instead, it has been kept at Rs. 75 lakhs which is exactly the half of the normal states’ turnover threshold. This leads to the point of discrimination among traders when they have same turnover as a trader having a turnover of Rs 1 Crore in a special state cannot opt composition scheme whereas trader of a normal state can opt the scheme with the same turnover. Further, few of these special states are tourist places and they have even more business than the normal states e.g. Himachal Pradesh.
Thus, it should be ensured that the benefit of the composition scheme must reach equally to everyone since the very reasoning behind this difference in the composition scheme threshold limits for special and normal states remains a mystery to the public sphere as this very question still remains unanswered as of now.
However, this benefit is not at all in line with the composition scheme as the threshold limit for the special states should have been more than the normal ones in order to provide benefit to the shopkeepers. Instead, it has been kept at Rs. 75 lakhs which is exactly the half of the normal states’ turnover threshold. This leads to the point of discrimination among traders when they have same turnover as a trader having a turnover of Rs 1 Crore in a special state cannot opt composition scheme whereas trader of a normal state can opt the scheme with the same turnover. Further, few of these special states are tourist places and they have even more business than the normal states e.g. Himachal Pradesh.
Thus, it should be ensured that the benefit of the composition scheme must reach equally to everyone since the very reasoning behind this difference in the composition scheme threshold limits for special and normal states remains a mystery to the public sphere as this very question still remains unanswered as of now.