Choose GST Registration Type Based on Profit Margin i.e Composition or Normal Registration

Choose GST Registration Type Based on Profit Margin. GST Registration is Expected to be roll out from 1st July 2017 and GST Migration process is already started. Recently on 30th April 2017 GST Registration is stopped and now GST registration will be reopen from 1st June 2017 to 15th June 2017. If you are a small dealer and your total taxable supply of goods is under Rs.50 lakh per annum. Then you have to assure yourself about your Profit Margin. In this article we try to provide complete information regarding How to choose GST Registration Type i.e Composition Scheme or Normal Registration based on your Business Profit Margin..check detailed analysis from below…

Must Check

GST Registration Consent Letter, Authorization Letter Format
GST Registration Schedule, GST Registration last Dates All States 2017
How to Register and Update Digital Signature (DSC) on GST Portal
GST Registration Procedure for Existing Service Tax Dealers

Also Read: TDS on Sale of Property: What is Form 26QB?, Online form for TDS

Profit Margin >= 6%	Profit Margin < 6%
Take registration under Composite Scheme	Take registration under NormalScheme

Let assume your turnover is Rs. 40 lakh p.a.

E.g.1 : Suppose your profit margin is 6%

Sale	Rs. 40,00,000/‐
Tax on Composite Scheme@1%	Rs. 40,000/‐
Then Purchase is (40,00,000/106*100)	Rs. 37,73,585/‐
Then Profit amount is	2,26,415 (40,00,000 – 37,73,585)
Tax payable under Normal scheme@18%	Rs. 40,755/‐ (18% of 2,26,415)
Benefit of Composite Scheme*	Rs. 755/‐ ( 40,000 – 27692)

E.g.2 : Suppose your profit margin is 4%

Sale	Rs. 40,00,000/‐
Tax on Composite Scheme@1%	Rs. 40,000/‐
Then Purchase is (40,00,000/104*100)	Rs. 38,46,154/‐
Then Profit amount is	Rs. 1,53,846 (40,00,000 – 38,46,154)
Tax payable under Normal scheme@18%	Rs. 27,692/‐ (18% of 1,53,846)
Benefit of Normal Scheme	Rs. 12,308/‐ ( 40,000 – 27692)

*If your profit margin is higher than 6% then benefits is more in Composite Scheme.
If your profit margin is less than 6% then benefits is more in Normal Scheme.

Also Read: CMA Foundation Time Table December 2024: Exam Form, Fees

Author – Manish K. Singhania

Email : [email protected]

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