1. Overview of Composition Scheme under GST?

Composition scheme is mainly focused to benefit the MSMEs and small taxpayers. Composition scheme helps the MSMEs and small taxpayers to avoid complex monthly Formalities under GST Act and opt to discharge their GST liabilities at a predefined fixed rate. Further a dealer under composition scheme is required to maintain fewer records/ books of accounts.

2. Class of person who can opt for Composition Scheme?

Turnover Limit:

Supply of Goods: A taxpayer whose aggregate turnover is up to 1.5 Cr (75 Lakhs for North Eastern states and Himachal Pradesh).

Supply of Services: A taxpayer whose aggregate turnover is up to 50 Lakhs (Notification No. 2/2019

Following Class of Persons are not eligible to get registered under Composition Scheme:

  • Person making interstate supplies
  • A casual taxable person or a non-resident taxable person
  • Businesses which supply goods through an e-commerce operator
  • Manufacturer of ice cream, pan masala, or tobacco
  •  Person engaged in supply of goods which are not liable to tax

3. Procedure to opt for Composition Scheme.

To opt for Composition Scheme the taxpayer needs to file Form GST CMP -02 with GST authorities, this can be done at after logging into the GST portal at https://services.gst.gov.in/services/login.

This intimation needs to be filed every year by the dealer who wishes to opt for composition scheme.

For Financial Year 2020-21, the dealer wishing to opt for Composition scheme under GST can file intimation in Form GST CMP-02 on or before 30th June 2020. Further all the dealer opting for Composition scheme for FY 2020-21, need to file ITC-03 by 31st July 2020, so as to reduce available ITC at the time of opting for Composition Scheme. (Notification No. 30/2020)

4. Conditions for persons who opt for Composition Scheme?

  • Person opting composition scheme shall not collect tax on outward supplies
  • Taxable person opting composition scheme will not be eligible to claim input tax credit
  • If opts for composition scheme for one registration, then it Would become applicable for all businesses having registrations under same PAN

5. What if composition dealers receive inward supplies liable to reverse Charge Mechanism?

Dealer needs to discharge tax at normal rates for transactions under the Reverse Charge Mechanism.

6. Invoice under Composition Scheme.
The Composition dealer is not allowed to issue Tax Invoice, instead of Tax Invoice composition dealers can issue Bill of Supply mentioning the words ‘composition taxable person thereon.

7. Applicable rates of Taxes

Manufacture and Trader of Goods @ 0.5% + 0.5% = 1%

Restaurants @ 2.5% + 2.5% = 5%

Other Services @ 3% + 3% = 6%

8. Returns which Needs to be filed

GSTR 4: It is a return which needs to be filed annually by 30th April after the end of Financial Year.

For Financial Year 2019-20, the date for filing of GSTR 4 has been extended till 15th July 2020 (Notification No. 34/2020)

CMP 08: The composition dealers have to pay tax in CMP-08 challan cum statement every quarter by the 18th of the month following the quarter.

Due date for filing of Form GST CMP 08 for payment of Tax for the quarter ending 31st March 2020 has been extended till July 2020 (Earlier the due date was 18th April 2020) (Notification No. 34/2020)

GSTR 9A: Annual Return to be filed annually by 31st December following the end of relevant Financial Year.

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March 2021