Search Composition Taxpayer

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Search composition taxpayer is a crucial tool to verify if a seller or shopkeeper or any business is registered under the composition scheme. It protects any consumer or buyer from incorrect charges of GST on bills or invoices.

Who is a composition taxpayer?

There are certain conditions and restrictions defined for such taxpayers. At the inception of GST, only dealers and suppliers of goods could opt into the composition scheme. It is governed by Section 10 of the CGST Act. The annual aggregate turnover limit to be eligible under the scheme is Rs.1.5 crore. However, from 1st April 2019 onwards, even service providers are given an alternate option to join a similar scheme. The annual aggregate turnover limit, in this case, is Rs.50 lakh. The tax rate applicable for manufacturers and traders is 1% (0.5% towards CGST and 0.5% towards SGST). Whereas the restaurants not serving alcohol must pay 5% (2.5% towards CGST and 2.5% towards SGST). On the other hand, service providers have to pay 6% towards GST (3% towards CGST and 3% towards SGST).

What are the conditions to be satisfied by a composition taxpayer as per the GST law?

• Input Tax Credit (ITC) cannot be claimed by a dealer or service provider opting for a composition scheme.
• The dealer cannot supply goods that are not taxable under GST, such as alcohol. Further, persons manufacturing or making ice cream, pan masala, or tobacco cannot opt into the scheme.
• The composition taxpayer cannot make interstate supplies of goods or services. Further, he cannot supply through e-commerce operators required to collect tax at source or TCS.
• The taxpayer must make a tax payment at standard rates for transactions under the Reverse Charge Mechanism (RCM).
• Suppose a taxable person has different business units such as textile, electronic accessories, groceries, etc., under the same PAN. In that case, they must register all such business units under the scheme cumulatively or opt out of the scheme together.
• The composition taxpayer must issue a bill of supply without GST mentioned thereon instead of the tax invoice.
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
• The taxpayer must mention the words ‘composition taxable person’ on every bill of supply issued by him.
• A manufacturer or trader can also supply services to the extent of 10% of turnover, or Rs.5 lakh, whichever is higher from 1st February 2019.

Why is it important to find out whether or not a taxpayer has opted into the composition scheme?

Any customer must make sure whether or not GST must be charged on the purchases he is making. An invoice is always a reliable document to find this out. But in many cases, the shopkeeper or the supplier may defraud the customer by charging and collecting additional amounts in the name of GST, even though they are not authorised to do so. 

Hence, to avoid such confusions, the GST law instructs the GST registered taxpayers to display their GSTIN on the signboard and have the registration certificate displayed at all the places of business registered on the GST portal. Further, special provisions are defined for composition taxpayers. They must specifically mention that they are registered under the composition levy on their bill of supply and the signboards. Accordingly, the customers need not pay any GST for purchases from such composition taxpayers.

How can one find out if a seller is a composition taxable person?

Composition taxpayers must not charge GST to their customers. 

There are three quick ways to find out if a seller is a composition taxpayer:

Firstly, look for the text “composition taxable person” on every notice or signboard situated at his principal or additional places of business.

Secondly, the bill issued by him must have the words “composition taxable person, not eligible to collect tax on supplies” printed at the top.

Lastly, verify this on the GST portal, the steps of which are explained in the further sections.

What is a search composition taxpayer tool?

A search composition taxpayer tool is a handy tool to find out if a particular GSTIN is still registered as a composition taxpayer or not. Further, one can get a list of taxpayers registered under the composition scheme based on the legal name you enter. 

This feature can be used by anyone free of cost, provided they have the requisite GSTIN on hand or the legal name, either partially or completely.

How to use the ClearTax GST search composition taxpayer tool?

Any person can visit our tool by browsing cleartax.in/s/search-composition-taxpayer on the web.

Thereafter, simply select ‘Opt in’ or ‘Opt out’ and either choose to enter GSTIN or state.

Enter the GSTIN or state based on selection made earlier. 

You will get the result displayed on the page.

The GST portal also provides a similar tool for the taxpayers visiting the portal.

Advantages of online search composition taxpayer tool

The benefits of using this tool are:

• To check the validity of any GSTIN.
• To identify or find out if a particular GSTIN is a composition taxpayer or not.
• To know if you must pay GST or not to a vendor, by finding out if he is a composition taxpayer or not.
• A GSTIN on a hand-written invoice can be verified easily if unclear.
• One can avoid associating with suppliers using fake GSTINs.
• Avoid GSTIN fraud.
• Help vendors correct any potential mistakes in reporting GSTIN.