Composition scheme is an alternate method of taxation that allows small businesses with annual turnover up to Rs 75 lakhs to pay tax at a concessional rate as well as reduce the compliance cost. The threshold is 50 lakhs for dealers across nine states including Arunachal Pradesh, Nagaland, Tripura. Enrolment into the plan, however, is optional.
According to numbers released, the response of the dealers towards composition scheme has been lukewarm.
An eligible dealer can pay tax at a prescribed percentage of the business’ turnover every quarter, instead of paying tax at normal rate. Under the scheme, traders, manufacturers and restaurants can pay tax at 1, 2 and 5 percent, respectively. Compliance burden for taxpayer would reduce as they will have to file returns only once in a quarter as against monthly returns that needs to be filed by other normal taxpayers.