GST as we all know is the Game changer has increased Number of Taxpayers Basically Small and Medium Enterprises but at the same time their compliance for SME was a big Challenge. In order to overcome the compliance burden, Composition Scheme  has been introduced under GST whereby Taxpayer has to pay the GST at the lowest Rate.

Eligibility for Composition Schemes Under GST:

Taxpayer with Turnover limit up to 1.5Cr  (As amended by the Notification No. 14/2019 – Central Tax New Delhi, the 7th March, 2019.) The limit for special category states [(i) Arunachal Pradesh (ii) Uttarakhand (iii) Manipur (iv) Meghalaya (v) Mizoram (vi) Nagaland (vii) Sikkim (viii) Tripura] remains 75 lakhs. 

It may be noted that till 2018-19, Himachal Pradesh and Assam was in the special category states which is not there in the Notification 14/2019 and hence registered persons registered in Himachal Pradesh can take benefit  up to the turnover of 150 lakhs. Uttarakhand was not there in special category state up to the financial year 2018-19 and benefit upto the full limit [one crore] was available there under composition scheme. In the present Notification, the limit has been reduced to 75 lakhs in Uttarakhand.

Also, check composition scheme under gst.

Conditions to be fulfilled for Composition Scheme Under GST:

1. Only Supplier of Goods can opt for this Scheme with Service Provision up to Rs. 5lacs, (Exception is Restaurant Services up to 5 Cr)

2. No Inter-stateSales Transactions are allowed, but Taxpayer under Composition scheme is allowed to Purchase Inter- states.

3. No Input Credit will be allowed on Purchases.

4. Taxpayer is not allowed to Charge GST on Bill.

5. E-Commerce Operators, Service Providers, Exempted Supplies, Casual Taxable Person are not allowed to opt Composition Scheme.

6. Taxpayer with Same PAN will not be allowed to opt for Composition scheme in one state and Regular Scheme in Other Also Turnover Criteria of Rs. 1.5 Cr should be taken as a whole PAN based and not state-wise.

7. Taxpayer has to pay normal tax under RCM provisions.

8. Taxpayer has to mention “Composition Taxable Person” on every document and on Display board at Place of Business.

9. Taxpayer has to Issue “BILL OF SUPPLY” instead of “TAX INVOICE”.

Registrations Process for Composition Scheme Under GST:

1 .Form GST CMP-1: A business who has registered under earlier regime and who wanted to opt for Composition Scheme on migrating to GST.

2. Form GST CMP -2: This is applicable for those businesses that have registered under GST regime as a regular dealer and wanted to opt for Composition Scheme. The intimation via this form needs to be done before the commencement of financial year.

3. Form GST REG-1: Business applying for fresh registration in GST, and wanted to opt for Composition Scheme, can provide the intimation while the submitting registration online.

Returns Formalities for Composition Scheme Under GST:

A person opting for composition levy will have to pay tax on quarterly basis before 18th of the month succeeding the quarter during which the supplies were made.(in Form CMP-08). The said persons shall furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4 of the Central Goods and Services Tax Rules, 2017, on or before the 30th day of April following the end of such financial year.

Advantages of Composition Scheme Under GST:

1. Tax rates are lowest so the Tax liability is limited.

2. Less Compliance in comparison to regular scheme covering Monthly Returns, Maintaining Books and Invoice Issuance.

Disadvantages of Composition Scheme Under GST:

1. No inter-state sales Allowed which limits the business growth.

2. No Input Credit allowed which increases Cost

3. Service Providers are not eligible to opt for this Scheme. (Except Restaurant Services)

4. GST payment is out of pocket expense as taxpayer can’t charge GST on bill.

5. GST has to be paid on Purchases from Unregistered dealers.

Updated Tax Rates of Composition Scheme Under GST updated with Notification issued on 01-01-2018

Category of
Persons
SGST CGST IGST
Manufacturers 0.5% 0.5% 1%
Restaurant
Service
2.5% 2.5% 5%
Traders 0.5% 0.5% 1%

Composition Scheme under GST: Key Features, Eligibility & Benefits

(Article is republished with amendments by Taxguru Team & CA Anita Bhadra)

Author Bio

Qualification: CA in Practice
Company: Kartik Joshi & Associates
Location: Vapi, Gujarat, IN
Member Since: 04 Jan 2018 | Total Posts: 1

More Under Goods and Services Tax

4 Comments

  1. Manish Gupta says:

    A GST REGISTRATION UNDER COMPOSITION HAS BEEN CANCELLED AS ON 31-08-19 AND NEW REGISTRATION APPLY ON 17-09-2019 WITH EFFECTIVE 01-09-2019 AMD GST NUMBER HAS BEEN ALLOTED AS ON 23-09-2019. HOW TO SHOW PURCHASE BETWEEN 1-9 TO 23-08

  2. Ajay Rathee says:

    Can a “Person” registered under gst in more than One State opt for Composition Scheme?
    (Point no. 6 of this Article)

  3. VENKATRAJA BHAT says:

    Limit of 1.5 crore, Service provision upto 5 Lakhs – these are only recommendations of GST Council which are yet to be implemented by amending act & rules

    1. Ajay Rathee says:

      Dear these Provisions are Amended by CGST Amendment Act,2018 Applicable w.e.f 1st Feb 2019, with effect from 1st day of February, 2019 vide  Notification No. 02/2019 – Central Tax Dated 29th January, 2019.

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