GST Composition Scheme – Simplified

GST Composition Scheme is a special scheme meant for small businesses who find complying due compliances say keeping detailed records, filing regular returns under GST laws are burden. A small business who registered under GST Composition Scheme will enjoy certain benefits like concessional rate of tax, filing of quarterly returns instead of monthly return etc.

Eligibility for GST Composition Scheme

Small businesses, which have aggregate turnover up to Rs. 1.5 Crore in the preceding financial year, are eligible to get register under this scheme.  However, the registration under this scheme is optional. In other words, the registered tax payer whose aggregate turnover is less than Rs. 1.5 crore may go for standard registration under GST Laws.

In case of North-Eastern states and Himachal Pradesh, the limit is Rs. 75 lakh.

Composite Tax Rates under GST Composition Scheme

Sl. No.	Business	Tax Rate
1.	Manufacturers, other than manufacturers of such goods as may be notified by the Government	1 %
2.	Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II	2.5 %
3.	Any other supplier eligible for composition levy under section 10 and the provisions of  Chapter II – Composition Rules	0.5%

* In case of Traders, Turnover will be counted only for supply of taxable goods. 

Aggregate Turnover for GST Composition Scheme

The term ‘aggregate turnover’ has been defined as –

The aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess. Section 2(6) 

• The aggregate turnover is a vital eligibility criterion for a supplier to avail the benefit of composition levy.
• The aggregate turnover is different from turnover in a State.
• The composition levy would be calculated on the basis of turnover in the State.

Condition for availing GST Composition Scheme

Who are not eligible for Composition Scheme?

1. A supplier of services who having turnover more than Rs. 5 Lakhs per annum.
2. A Supplier of services except Restaurant Service where Alcohol is not served.
3. A taxable person engaged in inter-state supplies of goods
4. A non-resident taxable person
5. A taxable person engaged in supply of goods which are not taxable under GST Laws, i.e. Petroleum Crude

High Speed Diesel, Motor Spirit, Natural Gas, Aviation Turbine Fuel, Alcohol for Human Consumption.

6. A taxable person engaged in supply of goods through an e-commerce operator
7. A manufacturer of Ice Cream, Pan Masala & Tobacco Products

Restrictions

A taxable person not allowed or shall comply

1. To Charge & collect any tax from the recipient on supplies made by him.
2. To claim any input tax credit (ITC)
3. To procure goods from registered persons, otherwise, he has to pay tax under Reverse Charge Mechanism
4. Under obligation to mention in all his bills, memos of supplies, i.e. “Composition taxable person, not eligible to collect tax on supplies”.
5. Should display sign boards and notices with wordings “Composition Taxable Person” in a prominent place in his place of business including additional place of business, if any.

Compliance under GST Composition Scheme

• A Composite taxpayer is required to file a return (in Form GSTR 4) on quarterly basis instead of three returns every month as required under normal circumstances.

• Due Date: By 18^th of succeeding month of the quarter.

Due date of FORM GSTR-4 for the quarter July-September, 2017 has been extended till 24^th December2017

• In addition, the tax payer, required to file an annual return in Form GSTR 9A.

• No requirement of invoice-wise details in their returns.

(See Annexure for complete list of prescribed Returns) 

Effective date of composition levy under GST Composition Scheme

There may be three situations, they are –

Sl. No.	Situation	Effective date
1.	Who voluntarily opts composition scheme and allotted provisional registration – Rule 3(1)	Appointed date is 22nd June, 2017
2.	New Registration under Composition Scheme – Rule 3(2)	Effective date of registration
3.	Subsequent to standard registration – Rule 3(3)	The beginning of the financial year*

* Under no circumstances compositions can be exercised during middle of a financial year.

Compulsory Switch over to Regular Compliance

Benefit of composition levy lapses on the day the tax payer crosses the prescribed aggregate turnover. Presently, threshold limit is Rs. 1.5 Crore.

The registered person can also withdraw from the scheme voluntarily.

Thereafter, normal procedure of invoice, record keeping, and filing of returns will be applicable. He will be allowed to claim credit of Input Tax held in stock or semi-finished goods or finished goods.

Penalties under GST Composition Scheme

The proper officer, if has reason to believe that a composition dealer has wrongly availed the benefit under this scheme, then after taking recourse to adjudication, he can direct such person to pay all the taxes which is become due under standard GST Registration.

Recent Developments – 10^th November 2017

1. A registered person, migrated or newly registered, who could not opt for composition scheme, have one more option to avail the composition levy scheme till 31^st March, 2018.

2. Annual turnover for composition levy scheme has been increased to Rs. 2 crore (earlier Rs. 1 Crore). Thereafter, eligibility for composition will be increased to Rs. 1.5 Crore P.a.

3. Exempted service providers will now be eligible for the composition levy scheme.

4. 5 Million Registered entities have opted for the composition scheme.

5. Extension of return filing date for composition dealer for

Sl. No.	Quarter	Due Date
1.	July – August	31st December 2017.
2.	October – December	15th February, 2018
3.	January – March	30th April 2018.

Annexure – Composite Tax Returns 

Sl. No.	Form	Particulars	By
1.	GST CMP-01	To pay composition levy	Persons registered under previous regime and migrated to GST Regime
2.	GST CMP-02	To pay composition levy	Persons registered under the GST laws
3.	GST CMP-03	To pay composition levy	Intimation of details of stock on date of opting for composition levy by persons registered under previous regime and migrated to new regime
4.	GST CMP-04	To withdraw from composition Levy scheme	Registered Person
5.	GST CMP-05	To deny of option to pay compensation levy	Jurisdictional Officer
6.	GST CMP-06	To reply to Show Cause Notice	Registered Person
7.	GST CMP-07	To issue Order of acceptance / To reject reply to show cause notice	Jurisdictional Officer

Composition Scheme under GST: Key Features, Eligibility & Benefits