Composition Scheme under GST can be opted by a taxpayer whose turnover is below Rs 1.5 crore (Rs. 75 lacs for North Eastern States and Himachal Pradesh). For services, the turnover limit is Rs. 50 lacs.
Conditions For Opting Composition Scheme
In order to opt for Composition Scheme, following conditions must be fulfilled:
- Composition scheme dealer cannot claim any input tax credit.
- The dealer cannot supply non taxable goods under GST such as alcohol, petrol and diesel.
- Tax is to be paid at normal rates in case of transactions carried out under the Reverse Charge Mechanism.
- Different businesses are to be collectively registered under the composition scheme, if applicable.
- The words “Composition Taxable Person” are to be compulsorily displayed on every notice or signboard of place of business.
- The words “Composition Taxable Person” must be cited on every bill of supply that is issued.
- The manufacturer or trader can now also supply services to an extent of 10% of turnover or Rs. 5 lacs, whichever is higher.
Who Cannot opt For Composition Scheme?
GST Composition Scheme cannot be opted by person who is/makes
- any supply of goods which are not liable to be taxed under GST Act
- inter-state outward supplies of goods
- supplies through electronic commerce operators who are required to collect tax under section 52.
- a manufacturer of notified goods – ice cream, pan masala and tobacco.
- a casual dealer
- a Non-Resident Foreign Taxpayer
- a person registered as Input Service Distributor (ISD)
- a person registered as TDS Deductor/Tax Collector
When Can You opt For This Scheme?
In order to avail composition scheme under GST, you need to file an online application to opt for Composition Levy with the tax authorities. Taxpayers who can opt for this scheme can be categorized as below:
New Taxpayers: Any person who becomes liable to register under GST Act, after the appointed day, needs to file his option to pay composition amount in the Application for New Registration in Form GST REG-01.
Existing Taxpayers: Any taxpayer who is registered as normal tax payer under GST needs to file an application to opt for Composition Levy in Form GST-CMP-02 at GST Portal prior to the commencement of financial year for which the option to pay tax under the aforesaid section is exercised.
Can Composition Dealer Issue Invoice?
Under this scheme, the composition dealer cannot issue an invoice. This is so because the dealer cannot charge tax from its customers. Having been said that, the composite dealers have to pay taxes on their own and they cannot claim any input tax credit on it. Therefore, these dealers can issue bill of supply. The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply.
GST Rates Applicable Under Scheme
The GST rates applicable under Composition Scheme are as follows:
Particulars | GST Rate |
Manufacturers and traders | 1% of turnover |
Restaurants not serving alcohol | 5% |
Other service providers | 6% |
GST Payment Under Composition Scheme
As stated above, the composition dealer cannot levy tax on its customers and has to pay taxes on its own. The GST payment by composition dealer involves payment of:
- GST on supplies made
- Tax under reverse charge
- Tax on purchase from unregistered dealers on specified category of goods.
Returns To Be Filed Under Composition Scheme
The GST returns to be filed in composition scheme under GST are as follows:
- CMP-08: Quarterly statement to be filed by 18th of the month after the end of the quarter.
- GSTR-4: GST Return to be filed annually by 30th April of the next financial year w.e.f., 2019-20 onwards
- GSTR-9A: Annual GST Return to be filed by 31st December of the next financial year.