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July 7, 2020

Know all about Presumptive Tax Scheme under GST

by Mahesh Mara in Compliance Law, GST

Know all about Presumptive Tax Scheme under GST

What is the Presumptive Scheme?

  1. The Presumptive Taxation scheme introduced by the Central Board of Indirect Taxes and Customs (CBIC)
  2. It is a scheme in which a taxpayer has been allowed to pay GST at a fixed percentage on a presumptive basis.
  3. Consequently, it has been inferred that this ‘Presumptive Scheme’ is similar to the existing composition scheme but is not a composition scheme.

Who is eligible to avail the benefit of Presumptive Taxation Scheme?

A registered supplier may avail the benefit of Presumptive Taxation Scheme if:-

  1. aggregate turnover in the preceding financial year does not exceed Rs 50 lakhs
  2. supplier not eligible to pay tax under section 10 of the CGST Act (pertains to Composition scheme)
  3. he is not engaged in making any supply on which GST is not leviable
  4. he is not engaged in making any inter-State outward supply
  5. he is neither a casual taxable person nor a non-resident taxable person
  6. he is not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52; and
  7. he is not engaged in making supplies of the goods that are mentioned below:-
    1. Ice cream and other edible ice, whether or not containing cocoa
    2. Pan masala
    3. Tobacco and manufactured tobacco substitutes

What benefit is available under the Presumptive Taxation Scheme?

  1. Eligible person under this scheme shall pay GST at the rate of 6% (3% CGST and 3% SGST/UTGST) on his total supply up to Rs. 50 lakhs.
  2. The supplier opting for this scheme shall pay GST at the rate of 6% on all supplies made by him, irrespective of the fact whether such supply is exempt from tax or has different tax rates.
  3. If turnover from goods, services or both during the current year exceeds the limit, he shall continue to be eligible to avail of this scheme in that year.
  4. However, the benefit of concessional tax shall be available on the first supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees only.
  5. The turnover which exceeds this limit shall be subject to GST as per the applicable rates.

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Can a supplier who is availing the benefit of the Presumptive Taxation Scheme collect tax from his recipient?

The registered person availing the benefit of the Presumptive Taxation Scheme shall not collect any tax from the recipient on supplies made by him.

Can a supplier who is availing the benefit of the Presumptive Taxation Scheme claim input tax credit?

A supplier who is availing the benefit of the Presumptive Taxation Scheme shall not be entitled to any benefit of input tax.

Can a supplier who is availing the benefit of the Presumptive Taxation Scheme issue a normal tax invoice?

  1. The registered person shall issue, a bill of supply (instead of tax invoice) as referred to section 31(3)(c) of the CGST Act
  2. The registered person shall mention the following words at the top of the bill of supply, namely: ‘‘taxable person paying tax in terms of Notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’’

Is the Presumptive Scheme similar to the Composition Scheme under Section 10?

Due to the salient features of the Presumptive Scheme it has been inferred that it is similar to the existing composition scheme. However, the Presumptive Scheme is not a composition scheme.

Also presumptive scheme will only be applicable if the registered supplier is not eligible to pay tax under composition scheme governed by Section 10 of the CGST Act.

Types of SuppliesComposition SchemePresumptive Scheme
Goods1% 
Restaurant & Catering Services (other than serving alcohol)5% 
Goods & Services (deemed as composite supply) Turnover of services shouldnot exceed 10% of turnover in preceeding year or Rs 5 lakh, whichever is higher1%   
Goods, services or both upto Rs 50 lakhs 6%

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