Businesses with a turnover of less than 100 lakhs (Rs. 75 Lakhs for the Special Category States) can opt GST composition scheme. GST composition scheme limit is calculated on the aggregate turnover of all businesses registered with the same PAN number. Therefore, all businesses registered with the same PAN can either pay tax under composition scheme or pay tax under normal provisions but not a combination of both.

GST Composition Scheme

Persons not eligible for the GST Composition Scheme

The following persons cannot avail the benefit of composition scheme under GST:

  • A person supplying Exempt supplies
  • A person engaged in the supply of services other than restaurant related services
  • Producer of pan masala, tobacco or ice cream,
  • A Non-resident Taxable Person or a Casual Taxable Person
  • A person supplying goods through an e-commerce operator

Conditions for availment of GST Composition Scheme Rules

Below are the specified conditions that must be satisfied in order to avail composition scheme:

  • No Input Tax Credit (ITC) can be claimed by a taxpayer opting for GST composition scheme
  • The composition taxable person can only deal in intra-state supply (supply within the state) i.e. no inter-state supply of goods
  • The taxable person cannot supply exempted goods
  • The taxpayer has to pay tax at regular rates for dealings under Reverse Charge Mechanism
  • If a taxpayer has various businesses segments (such as pharmacy, electronics, groceries, etc.) under the same PAN, the taxpayer should register all such business under the scheme collectively or opt out of the composition scheme
  • The taxpayer opted for GST composition scheme has to indicate the word ‘composition taxable person’ on every notice or signboard shown prominently at their place of business.
  • The words ‘composition taxable person’ has to be mention on each bill of supply supplied by the composition taxable person.

Composition Scheme Rules under GST cover the submission of various forms that are meant for certain reasons.  Here is a table with a list of forms and the reasons for which they can be used:

GST-REG 01 Registration under the GST
GST -ITC 01 Information of inputs in stocks, semi-finished or finished goods
GST -ITC 13 Intimation of ITC available
GST-CMP 01 Registration under composition scheme
GST-CMP 02 Intimation for Opting out of the 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

In order to opt composition scheme under GST law, a taxpayer has to file Form GST CMP-01 or GST CMP-02, as the case may be, on the common portal. Intimation should be given in Part B of FORM GST-REG 01 by the person opting for Composition Scheme prior to the beginning of every Financial Year.

A composition taxable person cannot raise a tax invoice for the supplies made by him i.e. he cannot collect tax from his customer. However, the person opted for composition scheme shall issue a bill of supply for the supplies made by him. The composition taxable person shall the pay tax out of his own pocket. The composition taxable person is required to indicate the words “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.

Click here to Check who cannot opt Composition Scheme under GST

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One Comment

  1. Rashmi Gala says:

    Small shop owners propritory firms registered under composite scheme want to sale on Amazon. Can a shop owner have separate GST number for online sales where 5 to 18% GST is charged and regular sale in the shop where he pays 1% GST under composite scheme?

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June 2021