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*Professionals not to gain much from composition scheme under GST*



*Chartered Accountants/Professionals not to gain much from composition scheme under GST*



Government has vide *Notification No: 2/2019- CT(R) dated 07.03.2019* has provided for composition scheme for the service providers. As per the said notification service provider opting for composition scheme shall be required to pay tax at 3% Central GST and 3% State GST on the supplies made by him. The composition scheme for service providers is bound with certain conditions, of which one of them is that :

*Person is not engaged in making any inter-state outward supply*

In most of the cases involving Chartered Accountants they are engaged in one or the other audit/consulting assignments for persons situated in some other state. For Instance a CA firm registered in Chandigarh conducting audit for Bank registered in Delhi shall not be eligible to avail the benefit of composition scheme.  As per section 12 of the IGST Act the place of supply of services in case of supply to registered person becomes the place where the recipient is registered. In our example the location of supplier being Chandigarh and place of supply being Delhi, it becomes an inter-state transaction resulting into ineligibility of CA Firm to avail composition scheme.

Further to avail the composition scheme benefit the person *should not be a casual taxable person*. An event management company carrying out exhibitions and events at locations other than their place of registration is required to take registration as Casual Taxable person. In such a case they shall be required to take registration under regular scheme.

What we analyse from the notification is that composition scheme for service providers is restricted to a very large extent. Only those persons who are providing services within their states are eligible for composition scheme. This would include the daily need service providers like plumbers, carpenters etc. and other very small service providers whose domain is restricted to their states only. Even where a service provider is registered with an e-commerce entity and TCS is deducted, he shall also not be eligible for claiming the benefit under composition scheme. Let me reiterate that as per Notification 10/2017-Integrated Tax dated 13.10.2017, inter-state suppliers of services were made eligible for claiming benefit of minimum threshold limit of Rs. 20 lakhs but under composition scheme such benefit will also be discontinued as rate of 6% shall become applicable from very first supply made by the service provider.  

For example a job-worker situated in Panchkula (Haryana) doing job work for an Industry in Chandigarh was eligible for threshold exemption but now if he opts for composition scheme he shall be liable to pay tax from very first transaction. Now the job worker has to estimate his quantum of supply during a financial year and if the said quantum exceeds Rs. 20 lakhs he should opt for composition scheme before 31.03.2019. But where his quantum is expected to remain within 20 lakhs, he can enjoy the benefit of remaining unregistered under GST. There is a sign of caution because if during the year his turnover exceeds Rs. 20 lakhs, he will not only become liable for registration but also pay 18% GST on the turnover exceeding the threshold limit.

In short, the restricted composition scheme for service providers need to be opted cautiously.
Regards
CA. Keshav R Garg
+91-98880-90008

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