Difference Between Normal Dealer and Composition Dealer

The main difference between a normal dealer and a composition dealer under GST is the way they are taxed and the compliance requirements they have to follow.

Here are the main differences between a normal dealer and a composition dealer under GST:

1. Tax rate: Normal dealers pay tax at the applicable GST rate on the value of goods or services supplied. In contrast, composition dealers pay tax at a fixed rate based on their turnover.
2. Input tax credit: Normal dealers can claim input tax credit on the tax paid on purchases made by them, which reduces their overall tax liability. However, composition dealers are not eligible to claim input tax credit.
3. Returns filing: Normal dealers have to file regular monthly or quarterly returns with details of sales and purchases made by them along with the tax paid on them. Composition dealers have to file quarterly returns with a summary of their turnover and tax paid.
4. Collection of tax: Normal dealers can collect tax from their customers and issue a tax invoice, which enables their customers to claim input tax credit. Composition dealers cannot collect tax from their customers and are required to mention the words “Composition taxable person” on the bill of supply issued by them.
5. Eligibility criteria: Normal dealers have to register under GST if their turnover exceeds Rs. 20 lakhs (Rs. 10 lakhs for some special category states). In contrast, composition dealers can opt for the composition scheme if their turnover is below Rs. 1.5 crores.
6. Nature of business: Normal dealers can be engaged in any type of business, while composition dealers can only be engaged in the supply of goods and not services.
7. Tax liability: Normal dealers may have a higher tax liability than composition dealers, as they are taxed at the applicable rate, which can be higher than the fixed rate applicable to composition dealers.

In summary,

the main differences between normal dealers and composition dealers under GST are the way they are taxed, the eligibility criteria, and the compliance requirements they have to follow.