Composition scheme for service provider

This query is : Resolved

Ilyas Shaikh (Querist)
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11 August 2017 I am small service provider. Providing services for renting of electric and other generators.
My turnover does not exceed Rs 20L but company to whom I provide generators wants GST number.
But GST rate on respective services is very high i.e 18% and if I charge this amount in bill than company will not hire me for this services because total price including Gst will be very high
So Can I opt for composition scheme?
If no than plz provide me suitable solution to deal

Neha Jain

Neha Jain (Expert)
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11 August 2017 First of all if your turnover is below 20 lakhs than no need to take registration under GST.
If you get registered than GST charged by you or say payment done by your client than your client can take Input credit of GST charged by you so your clients rate doesnt increase by this.
If you are unregistered and your client is registered than your client has to pay GST via RCM than he/SHE can take ITC of that.
If you opt for composition than No ITC available to your client

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Ilyas Shaikh

Ilyas Shaikh (Querist)
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11 August 2017 Yes opnion is correct but is it possible to take registration under composition scheme for this services?

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Saket Agarwal

Saket Agarwal (Expert)
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12 August 2017 First - If turnover is below 20L then there is no need to register. Your customer also shouldn't force you, but nothing can be done if he is.

Second - If you take registration then you will start getting input tax credit on various expenses. These are your cost now. Hence, your cost will come down after you take registration. You will have to come up with a new selling price for your services. On this new sales price you should apply the 18% GST. Hence, on one hand your selling price will reduce and one the other GST will be added to your selling price. The net effect of this decrease and increase may even set off and your final price may remain same. You need to work this out with real figures.

Third - The GST that you will add on your selling price after registration will not a cost to your customer. Your customer will take the ITC of the GST that it pays you. Hence your customer should not look at the GST that it is going to pay you as a major burden. Your customer will have to pay that GST anyways - if it procures from any other registered dealer or if he purchases from an unregistered dealer (in the form of RCM if he procures from unregistered dealers).

Forth - After you are registered under GST there will be compliance costs as well. Like maintaining books of accounts, filing regular returns etc. When you are arriving at your selling price under second point above, you should also consider these additional costs which are not there if you are unregistered.

All the best :)

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