The Composition levy scheme is a very simple, hassle free compliance scheme and an alternative method of levy of tax designed for small taxpayers. It is a voluntary and optional scheme. The objective of composition scheme is to bring easy and reduced compliances; simple quarterly return, quarterly payment of taxes and no requirement of maintaining detailed records and accounts.
Limit & Applicability:
The composition scheme under GST is currently applicable to businesses where the aggregate turnover in the previous financial year do not exceed Rs. 1.5 crores (Rs.75 lakhs is applicable in case of North Eastern States & Uttarakhand)
Earlier, the composition scheme was not available to supplier of services, except supply of food for human consumption. However, w.e.f 01.02.2019 a person who opts for composition scheme may supply services of value not exceeding 10% of turnover in a State in the preceding financial year or 5 lakh rupees, whichever is higher.
Also, a simplified scheme has also been introduced that w.e.f 01.04.2019, small service providers (those who are supplier of goods as well as services but exceeding 10% of turnover within State/UT) whose aggregate turnover in preceding financial year is up to ₹ 50 lakhs can also opt for composition levy.
Aggregate turnover is computed on all India basis for a person having same Permanent Account Number (PAN). It is sum of value of all outward supplies falling in the following four categories:
CBEC has clarified that value of any exempt services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account for computing the aggregate turnover.
Rate of Tax under the scheme
|Type of Business||CGST Rate of Tax||SGST Rate of Tax|
|Manufacturers and Traders (Goods)||0.5%||0.5%|
|Restaurant Services (not serving alcohol)||2.5%||2.5%|
|Goods & Services provided turnover of services does not exceeds 10% of total turnover or Rs. 5 lakh, whichever is higher||0.5%||0.5%|
|Goods or Services or Both (mixed supplies) provided turnover is upto Rs. 50 lakh||3%||3%|
Eligibility for availing Composition Scheme:
|S.No.||Tariff Item, subheading, heading or chapter||Description|
|2105 00 00||Ice Cream and other edible ice, whether or not containing cocoa|
|2106 90 20||Pan Masala|
|2202 10 10||Aerated Water (Inserted vide Notification No. 43/2019-CT dt 30.09.2019)|
|24||All goods i.e Tobacco and manufactured tobacco subsitutes|
Apart from the above, any taxpayer who is exercising the option to pay tax shall also comply with the following condition:
Also where more than one registered persons are having the same PAN, the registered person shall not be eligible to opt for the scheme unless all such registered persons opt to pay tax under that such scheme.
List of various Forms available for taxpayers:
|Form||Purpose||Due Date for filing Return|
|GST CMP-01||Registration under Composition Scheme||Prior to appointed date or within 30 days of said date beginning of ﬁnancial year|
|GST CMP-02||Intimation of willingness to opt in of the scheme||Prior to commencement of Financial year*|
|GST CMP-03||Details of stock and inward supplies from unregistered person on the date of opting||Within 90 days of exercise option|
|GST CMP-04||Intimation of withdrawal from scheme||Within 7 days of occurrence of event|
|GST CMP-05||Show Cause Notice on any contravention of any rules or act||In contravention of rules or Act|
|GST CMP-06||Reply to Show Cause Notice||Within 15 days of received of Show Cause Notice|
|GST CMP-07||Order of Acceptance/Rejection of Reply to SCN||Within 30 days of received of reply to SCN|
|GST ITC-01||Declaration for claim of input tax credit in stocks, semi-ﬁnished and ﬁnished goods||Within 30 days of composition scheme option withdrawn or from the date of order|
|GST ITC-03||Intimation of ITC (Input Tax Credit) reversal/payment of taxes on inputs held in stock, semi-finished and finished goods.||Within 60 days of commencement of the ﬁnancial year.*|
|GST CMP-08||Statement for payment of Self- Assessed Tax (Quarterly Return) (w.e.f April,2019, previously filed as GSTR-4)||18th of the month after the end of the quarter**|
|GSTR-4||Annual Return||within 30th April of the succeeding year**|
|GSTR-9A||Annual Return (For Composition Taxpayer)||within 30th November of the succeeding year|
|* Due to COVID-19 outbreak, the taxpayer shall furnish the statement in Form GST ITC-03 within 31st July, 2020.
** Due to COVID -19 outbreak, the taxpayer can file Form GST CMP-08 for the quarter January-March 2020 till 7th July, 2020 and Form GSTR-4 for FY 2019-20 till 15th July, 2020.
*** It is optional to file GSTR-9A for the year 2017-18 and 2018-19.
Switch from Normal Tax Payer to Composition Scheme Tax Payer
In such a case, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day immediately preceding the date of such switch over. The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.
Switch from Composition Scheme Taxpayer to Normal Tax Payer
In such a case, the taxpayer will be allowed credit of duties held in stocks as inputs or credit of value added Tax in respect of inputs and inputs contained in semi-finished or finished goods on the appointed date subject to the following conditions:
Some Other important points: