The Goods and Service Tax regime has brought in many changes such as monthly payment of taxes, increase in a number of return and other compliances which a small taxpayer will difficult to comply with.
Therefore, the concept of composition levy under GST was introduced by the central government. This composition scheme under GST law is simple and convenient for small taxpayers. By availing this scheme the Small taxpayers can get rid of time-consuming and tedious GST compliances and can pay GST at a prescribed fixed rate (on the basis of the annual turnover of the business). However, this composition scheme can be availed by any taxpayer whose aggregate turnover is less than Rs. 100 lakh. Government has prescribed GST composition scheme rate.
Presently, the following goods are not leviable to Goods and Service Tax:
- Petroleum Crude
- High-Speed Diesel
- Motor Spirit
- Natural Gas
- Aviation Turbine Fuel
- Alcohol for Human Consumption
The rate of Composition Scheme under GST:
The Composition scheme rate under GST shall not be exceeded:
- In case of manufacturers, 0.5% of the turnover in State or turnover in Union Territory
- In case of a person engaged in making supplies of food and drink for human consumption (other than alcoholic liquor for human consumption), the rate is 2.5%.
- In the case of other suppliers, the rate of tax is 0.5%.
However, the above-mentioned rates are only in respect of CGST Act, the equivalent rates are prescribed under the SGST/UTGST Act. Therefore, the effective rates would be 5% for the supplier making the supply of food etc., 1% for manufacturers and 1% in case if other suppliers.
Composition Scheme – Goods and Service Tax Rates
|Supplier of food & drinks (restaurant business)||2.5%||2.5%||5%|
|Service Providers||Supplier of services (Except supplier of food and non-alcoholic drinks) cannot opt composition scheme.|
Under the composition scheme, the payment of GST has to be made out of pocket. In simple words, a taxpayer who opted for Composition Scheme cannot collect tax from its customer i.e. cannot charge GST in their Invoice.
A person registered under composition scheme is required to file a quarterly return (GSTR-4) by 18th of the month following the quarter. Apart from this return, an annual return (GSTR-9A) is also required to be filed by 31st December of the next financial year.
List of Different Forms Available for Composition Taxable Person
|GST CMP-01||Registration under composition scheme|
|GST CMP-02||Intimation for Opting GST composition scheme|
|GST CMP-03||Details of stock purchased from unregistered person|
|GST CMP-04||Intimation of withdrawal from the composition scheme|
|GST CMP-05||Show cause notice for any contravention under the act|
|GST CMP-06||Reply to show cause notice issued|
|GST CMP-07||Issue of Order|
Difference between Composition Dealer and Normal Dealer
|Point||Composition Dealer||Normal Dealer|
|Calculation||Gross Sales * Fixed Rate of Tax||GST payable – GST receivable|
|Returns||1 Return Quarterly |
1 Annual Return
|3 Returns Monthly |
1 Annual Return
|Sales||Only Intra-state allowed||Inter-state & Intra-state|
|Rate Of taxes||Lower Rate of Taxes||Higher Rate of Taxes|
In case a composition taxable person wants to opt out of composition scheme under the GST law, he can furnishan intimation(Form GST CMP-04). Within 30 days of such initiation to opt out of the scheme, the taxpayer must furnish the details of stock by filing Form GST ITC -01.