Blog Post
यह लेख हिंदी में पढने के लिए यहाँ क्लिक करें
In GST regime, mainly there are two type of registrations -
1. Regular GST Registration :- In this type of registration, the registrant can take credit of GST paid on his/her inward supplies (better known as ITC or Input Tax Credit) and utilize the same for setting of his/her liability on outward supplies.
2. Composition GST Registration :- In this type of registration, the registrant cannot take credit of GST paid on his/her inward supplies (better known as ITC or Input Tax Credit) and cannot utilize the same for setting of his/her liability on outward supplies, however, he/she has to pay a fix amount, say 1%, of turnover of goods sold, as GST but cannot charge this amount from his/her customers in outward invoices/bills.
So we are discussing here, which of the above two registration is beneficial ?
To answer the above query, let us assume that a goods supplier is receiving Goods and/or Services with payment of GST and the supplier has got registered with GST under Composition scheme.
In this scenario, his profit would be lower by that much amount of GST paid to its upstream suppliers for purchase of Goods and/or Services since as per prevailing GST law, the Composition registered person is not eligible to take input tax credit (ITC) of the goods and/or services purchased by him and even thereafter he has to pay GST @1% of its total turnover without charging any GST in the invoices issued by him.
For example, M/s ABC Medical Stores is a retailer and he is receiving different types of medicines at different rates of GST (considering some medicines are having 5% GST and others are having 12% GST) and say 10% is mean rate considering more purchases of say 10% GST medicines by him for further supply.
During a financial year, if M/s ABC Medical Stores (a composition registered person under GST) has received supplies of medicines amounting to Rs.1.00 crore and if mean GST rate is say 10% ~ Rs.10,00,000/- then total cost for ABC is Rs.1.10 crore as he cannot take ITC of Rs.10,00,000/- paid by him to his upstream suppliers.
Now suppose M/s ABC Medical Stores supplies these medicines at Rs.1.40 crore to its customers, then he has to pay another GST @1% ~ Rs.1,40,000/- which he cannot charge in the invoices issued by him.
So his profit would be lowered / diminished by Rs.11,40,000/- { Rs.10,00,000 + Rs.1,40,000 } if compared with similar Chemist registered with GST under Regular registration because regular GST registered person would be eligible to (1) take ITC and (2) charge appropriate GST in the invoices issued by him.
From the above example, its proven beyond doubt that a Regular GST registered person would always be beneficial rather than Composition person. In other words, one can say that the Composition registered person under GST would make loss of GST paid by him on its input supplies as well as output supplies as such GST paid would become cost for him. Therefore, Composition Scheme of GST is not suggested for goods suppliers.
