PROS AND CONS UNDER COMPOSITION SCHEME

<h1><span style=”text-decoration: underline;”>Positives in Composition Scheme:</span></h1>
Below are few of the reasons which may force you to get registered under the composition scheme:
<h3>a) Limited Compliance:</h3>
Lesser compliance w.r.t.

• furnishing of returns,
• maintenance of books of records, and
• issuance of invoices more focus on business

<h3>b) Limited Tax Liability:</h3>
On Comparison with regular taxpayers, person taxed under Composite Scheme will be liable to pay tax at a rate of 1% (Traders) / 2% (Manufacturer except 3 categories) / 5% (Restaurant service provider) on turnover.
<h3>c) High Liquidity:</h3>
Unlike normal taxpayers, taxpayers under Composition Scheme will be liable to pay taxes at a lower rate resulting in the lesser amount of his working capital.
<h1><span style=”text-decoration: underline;”>Negatives in Composition Scheme:</span></h1>
Below are few of the reasons which may force you not to consider the composition scheme:
<h3>a) No Credit of Input Tax:</h3>
Any person registered under Composition Scheme will not be eligible to take credit of input tax credit on inward supply.
<h3>b) No Inter-State Business:</h3>
The major drawback of this scheme is that the composition dealer cannot deal in inter-state supply or affect export of goods and services.
<h3>c) Pay tax from own pocket:</h3>
Since the composition dealer is not allowed to charge tax from his recipient in composition scheme, despite the rate being very low, he has to pay out of his own pocket.

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