Under the GST law, Composition scheme is an expedient way to escape from various GST formalities and pay the tax at a low prescribed percentage based upon the turnover of the business.

The composition scheme was introduced to bring straightforwardness and to minimize the compliance cost for the small taxpayers. Businesses with an aggregate turnover of up to 100 lakh in a preceding financial year shall be eligible for composition scheme.

Small taxpayers registered under composition scheme will not be required to raise any tax invoice, instead simply need to issue a Bill of Supply for the supplies made by them.

Though, the scheme is optional but cannot be availed by every person as the businesses with an aggregate turnover less than 1 crores in a financial year can opt for this scheme. However, in case of special category States (except Jammu & Kashmir and Uttarakhand) the threshold limit for composition scheme has been increased to Rs 75 Lacs.

In order to calculate the aggregate turnover of the business, all businesses with the same PAN will be clubbed for the purpose of composition scheme. However, the benefit of this scheme can be avail by Manufacturers of goods, Dealers, and Restaurants.

For an instance:

A dealer ‘Mr. Amit’ has two offices in Mumbai. In order to determine whether ‘Mr. Amit’ is eligible to opt the composition scheme, turnover of both the offices would be taken into account and if the same does not exceed ` 100 lakh.

Who cannot opt for GST Composition Scheme

The following people cannot avail the benefit of the GST composition scheme:

  • Supplier engaged in supply of exempt supplies.
  • Supplier engaged in supply of services (other than restaurant related services)
  • Producer of ice cream, pan masala, or tobacco
  • A Casual taxable person
  • A non-resident taxable person
  • Businesses supplying goods through an e-commerce portal

Details of stock to be furnished:

The person seeking registration under composition levy needs to furnish the details of:

  • stock held by him (whether purchased from registered or unregistered suppliers) on the day prior to the date from which he opts for composition scheme,
  • in the prescribed form, electronically on the common portal,
  • within a time period of 90 days
  • from the date of opting composition levy or within such further period as may be extended by the Commissioner in this behalf.

The process to get registered as Composite Taxpayer

A person can get the registration under the composition scheme in the following manner:

Situation 1: Where a person who is already registered under the Pre-Gst tax regime

  • Where a person is registered under the old tax regime (excise, service tax or VAT) and applying for the GST Registration will be given a Provisional Certificate first.
  • If that person opting to get registered as composition taxable person under GST, then he will be required to file an intimation (FORM GST CMP-01), verified via electronic verification code:
    • through a Facilitation Centre, or
    • directly on the common portal
  • Further, the person seeking for registration has to furnish the details of the stock held by him, whether such goods are purchased from the registered or unregistered person.
  • The person registered as composition taxable person shall not collect any tax from the appointed day. The composition taxable person shall issue a bill of supply for the supplies made after the appointed day.

Situation 2: Person applying for fresh registration.

Every person who is liable to get registered shall, before applying for registration, declare his PAN, mobile number, e-mail address, State/UT in Part A of FORM GST REG-01   on GST Common Portal.  The person seeking for registration has given an option to pay tax under composition levy in Part B of the registration form, viz., FORM GST REG-01.

Why opt for composition scheme under GST?

  • The taxable person isn’t required to maintain records
  • Hassle-free tax payments at the single rate
  • Hassle-free return filing instead of costly and cumbersome process of monthly return filing.

Checkout GST Composition Scheme Rules here

Author Bio

Qualification: CA in Job / Business
Company: Taxguru Consultancy / Taxguru Edu
Location: Mumbai, Maharashtra, India
Member Since: 27 Feb 2017 | Total Posts: 896
A Blogger by Passion and a Chartered Accountant by Profession. View Full Profile

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June 2021