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GST Composition Scheme
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Composition Scheme for GST
What is the GST Composition Scheme:
A composition Scheme is a GST scheme in which a Tax Payer pays a reduced amount of tax. This scheme was implemented by the GST to protect the interests of small business owners in India. Unlike typical taxpayers, this scheme requires the taxpayer to pay GST at a fixed percentage of turnover.
Who can opt for this program:
The Composition Scheme is available to Taxable Traders with an annual turnover of up to Rs 1.5 Crore (Rs 75 Lakhs in the Special Category States) and Service Providers with an annual turnover of up to Rs 50 Lakhs. The composition dealer may take advantage of the fixed rate of tax on turnover if the following conditions are met:
- A composition taxable person is ineligible to claim input tax.
- A composition taxpayer cannot provide exempted goods or services.
- If he purchases goods or services from an unregistered vendor, he must pay normal tax rates through the reverse charge mechanism.
- A composition-taxable person is unable to issue tax invoices because he cannot charge customers for tax; instead, he pays a fixed percentage of his gross revenue. In lieu of a tax bill, he issues a Bill of Supply.
- A composition taxpayer must combine all of his businesses under one PAN.
- A composition taxable person must include the phrase "COMPOSITION TAXABLE PERSON" on all notices, invoices, nameplates, etc.
- A taxable person who is a trader may also provide services up to 10% of his turnover or Rs. 5 lakhs, whichever is greater.
- A person electing composition will only do so at the beginning of the fiscal year. No dealer is permitted to choose a composition in the middle of the fiscal year.
Who can opt for this program:
| Type of Business | CGST | SGST | Total |
|---|---|---|---|
| Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobacco products, supply of goods through e-Commerce etc.) | 0.5% | 0.5% | 1% |
| Restaurants not serving alcohol | 2.5% | 2.5% | 5% |
| Traders or any other supplier eligible for composition levy | 0.5% | 0.5% | 1% |
| Goods & Services (As composite supply). Provided that turnover of services doesn’t exceeds 10% of total turnover in previous year or Rs. 5 Lacs, whichever is higher. | 0.5% | 0.5% | 1% |
| Goods or Services (As mixed supplies). This is as per Notification No. 2/2019 – Central tax Rate, dated 7th March, 2019 – Presumptive Scheme under GST | 3% | 3% | 6% |
Who cannot opt for this program:
The following individuals are ineligible to participate:
- A casual taxpayer;
- Persons engaged in interstate exportation of goods;
- A non-resident tax-paying individual;
- Suppliers who provide goods via an operator of electronic commerce who is required to withhold tax at source in accordance with section 52
- suppliers of goods with annual sales of more than 1.5 crores rupees ($75 lakhs for Special Category States) and providers of services with annual sales of more than 50 lakhs rupees;
- A manufacturer of Ice Cream and other edible ices, with or without cocoa, pan masala, tobacco, and manufactured tobacco substitutes. Traders of ice cream, edible ice, pan masala, and tobacco products are eligible to participate in this program.
- Other than restaurant services, supplier of services
- Persons supplying goods that are exempt from GST taxation
Advantages of the Composition Scheme:
The following are the advantages of the Composition Scheme for Composition Dealers:
- In contrast to normal taxpayers, they pay a fixed percentage of their revenue in taxes.
- Less Compliance because they only file one return quarterly and one return annually.
- It is not required to keep books, records, or invoices.
GST Composition Returns:
The following are the advantages of the Composition Scheme for Composition Dealers:
- GST CMP-08: The composition dealer is required to pay tax and file a return quarterly.
- GSTR-4: The composition dealer must file a GSTR-4 Annual Return at the end of each fiscal year.
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