A government-appointed committee has recommended against inclusion of all services, barring restaurants, under the ambit of composition scheme in the Goods and Services Tax (GST) regime. The 10-member Law Review Committee, comprising representatives from both the Centre and states, also suggested that the limit of services provided by a composition dealer should be limited to 10 per cent of the taxable turnover or Rs 5 lakh, whichever is higher. The panel suggested a separate composition rate not exceeding 18 per cent for services supplied by composition dealer by way of job work, sources said. The recommendations by the Law Review Committee is based on the suggestions made by the advisory panel, comprising representatives from trade and industry, which wanted composition scheme to be extended to all service providers.
Over 15 lakh businesses opted for composition scheme, which allows them to pay taxes at a concessional rate and makes compliance easy under the GST which was rolled out from July 1. Under the scheme, traders and manufacturers can pay taxes at a concessional rate of 1 per cent while restaurants pay 5 per cent GST. The composition scheme is open for manufacturers, restaurant owners and traders whose turnover does not exceed Rs 1.5 crore.
The Council in its November meeting increased the threshold for the composition scheme to Rs 1.5 crore and also decided to amend the GST law to raise the statutory threshold to Rs 2 crore. The law review committee, which has 5 members each from Centre and states, have suggested that GST Council should limit the composition scheme threshold limit at Rs 1.5 crore for the time being.
According to sources, the committee is not in favour of raising the threshold further to Rs 2 crore immediately. The law review committee also suggested that the composition scheme should not be extended to businesses which are engaged in inter-state supply of goods and services. The recommendations of the law review committee is likely to be taken up for consideration by the GST Council, comprising Centre and states, in its next meeting on January 18.