Mr. A:- Good Day Sir, how are you?

CA:- Hi Mr. A, I am doing fine, how about you?

Mr A:- Doing Good, So today can you tell me about the Composition scheme under GST?

CA:- Sure Mr. A, there is a provision of composition scheme under GST provide under Section 10.

Any Person whose aggregate turnover (Taxable + Exempted) in preceding financial year did not exceed 75 Lac (50 Lac for special category states), then that person can apply for registration under composition scheme.

Further, if in case a taxable person has different business segments (like Textile, Grocery etc) having same PAN as held by the taxable person, he must register all such businesses under the scheme. Hence, all the business under one PAN should opt for Composition scheme.

Mr A:- Ok, and if cross the limit of 75 Lacs in current year then can I continue with composition scheme for rest of the year?

CA:- No, Mr. A. The option of composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs.75 Lakhs. In such cases, the person has to file form GST CMP-04 within seven days intimating withdrawal from composition scheme.

Mr A:- Ok is there is any exception for any class of business entity who cannot enroll in composition scheme?

CA:- Actually, apart from the criteria of 75 Lacs, there is a list of persons who cannot opt for composition scheme even if there turnover is below 75 Lacs. They are:

i) Any service provider except restaurant service

ii) Person dealing in goods which are not covered under this act like Liquor

iii) Person having interstate supply

iv) Person supplying through e-Commerce operator

v) Person manufacturing goods as notified by government

So these persons will not be eligible to take registration under Composition scheme in GST.

Mr A:- OK, so if I have to opt the composition for only one of my business, then I cannot opt it?

CA:- Yes, Mr. A. Your all business under one PAN should go for composition. It is not possible to register one entity in composition and another as normal using one PAN.

Mr A:- OK, so what are the rates in Composition scheme?

CA:- In GST, there is no single rate for Composition dealers. The rates in GST for composition dealers is dependent on nature of dealer. The rates are as follows:

Manufacturers 1%
Specific service provider i.e. restaurant service 2.5%
Any other dealer 0.5%

Also, please note that any person registered under composition scheme will not be eligible to claim any input tax credit.

Mr A:- OK, so are these the final rates?

CA:- These rates for CGST act and similarly there will be SGST/UTGST rates. Hence, the final composition rates will be total of CGST and SGST rates. For example, if in Rajasthan GST also the composition rate is 1% for manufacturers then the total composition rate for manufacturer will be 2% (CGST+SGST).

Also, instead of monthly returns, there are quarterly returns in composition scheme which makes this scheme easier form the point of view of compliance. We will discuss on the returns requirement under GST in our next discussion.

Mr A:- What are the invoice formats for Composition dealers in GST?

CA:- Under GST, every Composition dealer shall issue a bill of supply for sales. In that bill of supply, he shall mention the words “Composition taxable person, not eligible to collect tax on supplies”.

Also, he shall mention the words “Composition Taxable person” on every notice or signboard displayed at place of business.

Mr A:- OK, Awesome. Thanks for clearing the concept of Composition scheme under GST

(MJL & Co, Jaipur, Chartered Accountants, Email- MJLco.Jaipur@gmail.com, Phone No. – 0141-4915113)

Author Bio

Qualification: CA in Practice
Company: M J L & Co
Location: Jaipur, Rajasthan, IN
Member Since: 24 Jun 2017 | Total Posts: 11
M J L & CO is a chartered accountancy firm registered with Institute of Chartered Accountants of India (ICAI) having its head office at Jaipur. We are the team of young and energetic partners having positive attitude to provide expert and professional services with due care of professional ethic View Full Profile

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10 responses to “Goods & Services Tax: Composition Scheme”

  1. ramsingh says:

    Iwas regd.dealer in w.bengal in composition scheme but during the regtn.of GST Ihave not mention the composion scheme in application.I want go in composition scheme under GST also. plz tell me about this prosess

  2. VENKATRAJA BHAT says:

    As per Composition system under KVAT Act, purchase tax has to be paid on taxable URD Purchases in related tax period. Hence, if he opts to Composition in GST, then whether again he has to pay Pur tax as per table 8 & 9 of Form CMP-3. Under KVAT Act, there is no credit of input tax for composition dealer. Hence dealer did not account of purchase value & tax seperately. Then what is the purpose of providing information on RD Stock of goods held on 30.06.17 with classification of Value & VAT. The rule silent about whether this is applicable to VAT Dealer or CoT Dealer under existing law.

  3. Varad says:

    Sir, as you said that if a person has got more then one business having same PAN number then each of the business shall opt for the composition scheme. My question is that in such cases whether the limit of Rs. 7 5 lakhs will apply separately for each such business or will it be a combined limit of Rs. 7 5 lacks ?

  4. V.K.Dadoo says:

    Thanks very much for explanation.
    1. Kindly let us know the threshhold limit for Uttaranchal 75/50 Lacs.
    2. We are doing Job work (engineering). We are also selling Steam Turbine Parts out side home state of Uttaranchal, totalling around Rs. 70 Lacs+ Sales Tax etc. Do we qualify for Composite scheme? We are in Uttaranchal.

    • mjlcojaipur says:

      Sir,

      Composition limit for Uttaranchal is Rs 75 lacs. However, if you are making any interstate supply then you cannot opt for composition.

  5. Arjun Kharwar says:

    Thanks , very much

    Very Simply clear all doubt

  6. Sagar says:

    REVERSE CHARGE IS APPLICABLE FOR COMPOSITION TAXABLE PERSON
    e.g. if he purchase goods / received services from under registered person under GST

    • Srikant Agarwal says:

      Yes revelse charge is applicable for composition dealer as well.
      However turnover under reverse charge will not form part of aggregate turnover.

    • mjlcojaipur says:

      Thank you Sagar for your kind words and appreciating our efforts !!

      In response to your query, I would like to inform you that if Composition Taxable person purchase goods from unregistered person then RCM is applicable. He has to pay tax at normal tax rate applicable on goods and he will not get any input tax credit of tax paid under reverse charge since he is under composition.
      Also note that turnover under reverse charge will not form part of aggregate turnover.

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