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One of our readers wrote to us with this query:
I am planning to go for a private limited company and want to opt in for GST composition scheme to get the benefits of lower tax rates and easy compliance. How can I do it?
Name withheld on request
Dear MFD,
MFDs having Private Limited business structure may not get the benefits of GST composition scheme.
The GST Composition Scheme has been introduced for small tax payers. While there is no specific definition of small tax payers, generally, the tax authority is not likely to approve request of MFDs having company structure in the recent times.
Simply put, MFDs having private limited company, limited liability partnership or public limited company are not likely to get the benefits of composition scheme.
On the other hand, individuals having sole proprietorship or partnership firm are more likely to get approval for the GST composition scheme.
Please note that only Maharashtra MFDs can opt in for GST Composition Scheme if their annual income falls between Rs.20 lakh and Rs.50 lakh.
MFDs opting for GST Composition Scheme can get benefits of lower tax rates of 6%.
Another key benefit includes less compliance burden as GST returns has to be filed annually and payment has to be made each quarter.
Tax experts recommend applying for a GST composition scheme with individual ARN, sole proprietorship or partnership firm ARN.
Hope we have addressed your query.
Regards,
Team Cafemutual
Disclaimer: Please note that Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and chartered accountants to write this article. We intend to clarify your doubts on GST. This does not tantamount to be a tax advice of any nature or a recommendation. Please take advice from a qualified tax advisor for your guidance.
