GST Composition Scheme

What is Composition Scheme in GST:

Composition Scheme is a scheme in GST, in which a Tax Payer pays lesser tax. This scheme was introduced by GST to safegaurd the interests of the small business operators in India. In this scheme, the tax payer pays GST at a fixed percentage of turnover unlike a normal tax payer.

Who can opt this Scheme:

A Taxable Trader with an aggregate turnover during the financial year up to an amount of Rs. 1.50 Crore (Rs. 75 Lakhs in Special Category States) and a Service Provider with an aggregate turnover during the financial year up to an amount of Rs. 50 Lakhs can opt for Compostion Scheme. The composition dealer may enjoy the fixed rate of tax on turnover subject to the following conditions:
  • Input tax can not be claimed by a composition taxable person.

  • Composition taxable person can not supply exempted goods or services.

  • If he perchases goods or services from an unregistered dealer, he has to pay tax through reverse charge mechanism at normal tax rates.

  • A composition taxable person can not issue a tax invoice, because he can not charge from customers instead he pays a fixed percentage on his turnover. Instead of tax invoice he issues Bill of Supply.

  • A composition taxable person has to club all his business under one PAN.

  • A composition taxable person has to mention the words "COMPOSITION TAXABLE PERSON" on every notice, bill of supply, name board etc.,

  • The compostion taxable person, who is a trader can alos provide services up to 10% of his turnover or Rs. 5 lakhs, which ever is higher.

  • A person willing to opt for composition will opt only at the begining of the financial year. No dealer can opt for composition in the middile of the financial year.

Composition Scheme GST Rates:

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 can not opt this Scheme:

The following persons can not opt this Scheme:

  • A casual tax payer;

  • Persons making any Inter-State outward supplies of goods;

  • A Non-resident taxable person;

  • Suppliers making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52;

  • Suppliers of goods whose aggregate turnover in the preceding financial year crosses Rs. 1.5 Crores/ (Rs. 75 lakhs for Special Category States) and suppliers of services whose aggregate turnover during the preceding financial year crosses Rs. 50 Lakhs;

  • A manufacturer of Ice Cream and other edible ice, whether or not containing cocoa, Pan Masala, Tobacco and manufactured tobacco substitutes. However, the trader of ice cream, edible ice, pan masala or tobacco products shall be eligible to avail this scheme;

  • Supplier of services, other than restaurant service

  • Persons supplying goods which are not taxable under GST law

Benefits of Composition Scheme:

The following are the benefits available for Composition Dealer:

  • Lesser Tax Burden as they pay at a fixed percentate on turnover ulike a normal tax payer.

  • Lesser Compliance as they file only one return on quartely basis and one return on annual basis.

  • Not required to maintain books, records, invoices etc.

GST Composition Returns:

The following are the retuns to be filed under Composition Scheme:

  • GST CMP-08: The composition dealer has to pay tax and file a return in GST CMP-08 on Quarterly basis.

  • GSTR-4: The composition dealer has to file an Annual Return in Form GSTR-4 at the end of the financial year.

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