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Query Details

Asked by namish on :Jul. 17, 2018

What are the drawbacks of opting for the composit…

What are the drawbacks of opting for the composition scheme with regards to ITC?

What are the drawbacks of opting for the composition scheme with regards to ITC?

0

Chiranjibi Jul. 17, 2018

There has been no provision of input credit on B2B transactions. Thus, if any taxable person is carrying out business on B2B model, such person will not be allowed the credit of input tax paid from the output liability.

Also, the buyer of such goods will not get any credit on tax paid, resulting in price distortion and cascading. This will further result in a loss of business as a buyer registered as a normal taxpayer will not get any credit when buying from a person registered under composition scheme.

Eventually, such buyers might avoid purchases from a taxpayer under composition scheme.

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