Composition Scheme is uncomplicated and simple scheme under GST for small taxpayer. They can get relaxation from monotonous GST formalities and can also pay tax at a fixed rate of Turnover. This scheme is only applicable to those whose turnover is not exceeding Rs. 1.5 Crores.

ELIGIBLITY FOR COMPOSITION SCHEME:

A taxpayer whose turnover is less than Rs. 1.5 Crores can go for composition scheme, in case the taxpayer is from North Eastern States and Himachal Pradesh then the limit will be Rs. 75 Lakhs. A composition dealer is allowed to supply the services in the range of ten percent of turnover or Rs. 1.5 crores, whichever is higher as per the CGST (Amendment) Act, 2018. This amendment will take effect from 1st February, 2019. After that in 32nd meeting of Council on 10th January, 2019 proposed for an increment in this limit for service providers.

Composition Scheme Under GST - Eligibility, Tax Rate, Conditions

INELIGIBLE PERSON FOR COMPOSITION SCHEME:

The following person cannot opt for the composition scheme:

  • Manufacturer of ice-cream;
  • Manufacture of tobacco;
  • Manufacture of pan masala;
  • A person who is making an inter-state supplies;
  • A casual taxable person;
  • A non-resident taxable person;
  • Business which are engaged in supplying of goods through e-commerce operator.

Composition Scheme under GST Services:

TYPES OF BUSINESS CGST SGST TOTAL
MANUFACTURER AND TRADERS OF GOODS 0.5% 0.5% 1.0%
RESTAURANTS WHICH ARE NOT SERVING ALCOHOL 2.5% 2.5% 5.0%
OTHRES 3.0% 3.0% 6.0%

CONDITION FOR AVAILING COMPOSITION SCHEME:

  • Dealer cannot claim Input Tax Credit;
  • Dealer cannot supply non-taxable goods;
  • If there’s any transaction of Reverse Charge Mechanism then the taxpayer will have to pay tax at the rate of normal rate;
  • If the taxable person has different business then he will have to opt the Composition Scheme for all the business and not for only one;
  • The taxpayer will have to write ‘Composition Taxable Person’ on all the places where the place of business is and on all the notices.
  • While issuing bill of supply then also he will have to mention ‘Composition Taxable Person’.
  • A composition dealer is allowed to supply the services in the range of ten percent of turnover or Rs. 1.5 crores, whichever is higher as per the CGST (Amendment) Act, 2018.This amendment will take effect from 1st February, 2019.

HOW CAN THE TAXPAYER SHALL OPT FOR THIS SCHEME?

The person who wants to opt for this scheme will have to file Form GST CMP-02 with the government, he can also file his on GST Portal by logging in. This communication shall be done by the person at the start of the every financial year that the person wants to opt for the scheme.

ADVANTAGES OF COMPOSITION SCHEME:

There are following advantages of availing composition scheme:

  • There will be lesser compliance under this scheme,
  • There’s also limited tax liability,
  • There will be lower rate so taxes will have high liquidity.

DISADVANTAGES OF COMPOSITION SCHEME:

There are following disadvantages of availing composition scheme:

  • The taxable person is restricted for inter-state supplies,
  • The dealer will not be able claim Input Tax Credit,
  • The dealer will also not able to sell the non-taxable goods.

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Author- Adv.Shivam Kumar
Legel and content Executive, Taxblock India Pvt. Ltd

Author Bio

Qualification: Other
Company: Taxblock india Pvt.Ltd
Location: PUNE, Maharashtra, India
Member Since: 24 Jun 2021 | Total Posts: 50
Taxblock India Private Limited, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Indi View Full Profile

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