Last updated: January 11th, 2024 9:31 AM

3% GST Rate Scheme

The Government vide notification No. 2/2019-Central Tax (Rate) dated 7th March, 2019 had announced a 3% GST rate scheme for businesses in the new financial year 2019-20. In this article, we look at the various aspects of registering under the scheme to enjoy lower GST liability.

GST Notification No. 2/2019 - Central Tax

The 3% GST rate scheme was announced by the Government through notification No.2/2019 dated 7th March 2019. As per the notification, persons who had an aggregate turnover of less than Rs.50 lakhs in the preceding financial year can enroll under the scheme and pay a flat 3% CGST on the first 50 lakhs of supply of goods or services.

Eligibility

To be eligible under the scheme, the supplier must meet the following conditions:

1. Should have less than Rs.50 lakh aggregate turnover in the previous financial year or should be obtaining GST registration in the current financial year.
2. Should not be supplying any goods or services that are exempt from GST
3. Should not be involved in the making inter-state supply (Selling goods/services from one state to another state).
4. Should not make any sale through eCommerce operator
5. Should not be involved in the supply of ice cream, pan or tobacco
6. Should not be a casual taxable person or non-resident taxable person
7. Should not be enrolled under GST composition scheme

Requirements Post Enrolment

If the supplier satisfies the above conditions and enrolls under the scheme, the following conditions must be fullfilled:

1. Should not collect any GST from customers
2. Should not claim any GST Input Tax Credit
3. Should issue Bill of Supply NOT GST Invoice
4. The top of the Bill of Supply should contain the words "‘taxable person paying tax in terms ofnotification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies"
5. Should pay a flat 3% cental goods and services tax on all supplies
6. Pay GST as applicable on all purchases made

GST notification No.2/2019 is reproduced below for reference

Procedure for Availing 3% GST Rate Scheme

To avail the benefits under the scheme, the taxpayer is required to enroll by filing GST CMP-02 on or before 30th April 2019.

In case of an existing GST registration holder:

The registered person can opt for the 3% GST rate scheme by filing Form GST CMP-02 by selecting the category of registered person as “Any other supplier eligible for composition levy” before 30th April, 2019. In addition to GST CMP-02, the taxpayer would also be required to file FORM GST ITC03.

In case of new GST registration:

If a person or entity is applying for new GST registration and wants to opt for the scheme, they can do so by indicating the option while filing the GST registration application.

Availing the Benefits

The option to pay tax by availing the benefit of the above notification will be effective from the beginning of the financial year in case of an existing GST registration holder. In case of new GST registration applicants, the option to pay tax by availing the benefit will be available from the date of registration. The above details pertaining the enrolment under the scheme were clarified by the Government vide Circular No. 97/16/2019-GST dated 5th April 2019. The same is reproduced below for reference.