Composition Scheme under section 10 of CGST Act, 2017- Great Initiative for Small Tax payers under GST Act

Composition Scheme {Section 10 of CGST Act, 2017}

-Composition Scheme is a simple and easy scheme under GST for taxpayers.

-Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover.

Composition Scheme {Sec.10 of CGST Act, 2017}

*Special Category States are Arunachal Pradesh, Mizoram, Uttarakhand, Nagaland, Manipur, Sikkim, Tripura and Meghalaya.

Common Points for both Categories specified above:-

i. Issue Bill of Supply in Place of Tax Invoice.

ii. Should not avail ITC and should not collect tax from Customers (Sec.17 (5) Blocked Credit).

iii. Should not supply Goods/Services provided in Negative List.

iv. Should not make any Inter State Supplies (i.e. he can make Inter State Purchases).

v. Should not Supply services through ECO who is required to collect TCS (u/s.52) (Exception: Hotels).

vi. Casual Taxable Person or a Nonresident Taxable persons are ineligible to opt for this scheme.

vii. Manufacturers of Ice cream, Pan Masala, Tobacco, Aerated Waters are ineligible to opt for this scheme.

viii. Also should pay tax if any inward supply is covered under Reverse Charge u/s.9 (3).

ix. If a taxable person has different segments of businesses under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.

x. Mention the words “Composite Taxable Person” on every signboard displayed at his Principal/Additional Place of Business

xi. Registered Person under Sec.10 or as per notification 2/2019 should mention at the top of Bill of Supply issued by them as “Not Eligible to collect tax on such supplies made by them”.

xii. Aggregate Turnover for the Previous Year:-

Includes Excludes
Taxable Supplies CSGT
Exempt Supplies (Except Interest on Loans/ Deposits/ Advances) SGST
Exports UTGST
Inter State Supplies IGST
*of Persons having same PAN on All India Basis Cess
Value of Inward Supplies on which tax is Payable under RCM

How to get Registered under GST Composition Scheme:-

1) For New Registration:-

In registration form GST REG-01 itself

2) For Conversion from Regular to Composition Scheme:-

  • File an Intimation in GST CMP-02 on the GST portal, Prior to the Commencement of the Financial Year for which Composition scheme is to be exercised.
  • Composition scheme cannot be opted in the middle of the Financial Year, as the intimation is given before Commencement of F.Y.
  • Option to pay tax under Composition scheme is available from the beginning of the Financial Year.
  • After conversion, assesse should file GST ITC-03 within 60 days from the commencement of the relevant F.Y regarding reversal of ITC on stock in Hand at the beginning of the F.Y.

Penal Provision:-

  • Penalty u/s.73 or 74 as the case may be shall be levied on irregular availment of Composition Scheme.

GST Payment by Composition Dealer:-

  • Payment has to be made out of pocket for the supplies made by him.
  • The GST payment to be made by a composition dealer comprises of the following:

a) GST on supplies made.

b) Tax on reverse charge.

Returns to be filed by a composition dealer:-

a) Quarterly Filing:-

GST CMP-08 for every quarter containing the details of Tax Payment by 18th of the month succeeding such quarter.

b) Annual Return:-

Furnish GSTR-4 yearly on or before the 30th day of April following the end of such F.Y.

Update due to Covid-19:-

  • The time limit to opt into the composition scheme for the FY 2020-21 in form CMP-02 has been extended up to 30th June 2020. It applies for both taxpayers registered under section 10 of the CGST Act as well as the taxpayers opting for the scheme notified via CGST (Rate) notification no. 2/2019 dated 7th March 2019.
  • The time limit to file form ITC-03 has accordingly been extended till 31st July 2020.
  • The dealers can submit challan-cum-statement in form CMP-08 for the January-March 2020 quarter by 7th July 2020.
  • The time limit to file GSTR-4 annual returns for the FY 2019-20 by the composition dealers has been extended till 15th July 2020.

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8 Comments

  1. Kollipara sundaraiah says:

    Sir,
    A composite scheme dealer gstr4 annual return filed 19-20.but dealer mistake sales turnover amount not reported in gstr4 annual return in 19-20.doubt for dealer Mistake sales turnover how to adjustment producure in gstr4 19-20.

  2. Kollipara sundaraiah says:

    Another gst question:
    Iam enrolled Graduated based registered in gst practitioner in gst.gov.in portal.every gst practitioner registered person GSTP exmaination passed compulsory or not.

  3. DEVENDRA SHARDA says:

    in section 10(2) (b) it is clearly mentioned that a dealer opt composition scheme only when he doesn’t deal in exempted supplies, so how can a dealer who is in composition scheme will pay tax ONLY ON TAXABLE SUPPLIES. explain!!

    1. Santhosh Gupta says:

      Hi Devendra,
      Sec.10 has nowhere said that a dealer opting composition scheme shouldn’t deal with exempted supplies.
      What Sec.10 speaks is clearly reproduced below for your reference:
      The registered person shall be eligible to opt under sub-section (1), if:
      a) He is not engaged in the supply of services other than supplies referred to in
      Clause (b) of paragraph 6 of Schedule II;
      b) He is not engaged in making any supply of goods which are not leviable to tax
      Under this Act; (Means goods which are excluded from the scope of taxation under GST Ex: Alcoholic Liquor for Human Consumption)
      c) He is not engaged in making any inter-State outward supplies of goods;
      d) He is not engaged in making any supply of goods through an electronic
      Commerce operator who is required to collect tax at source under section 52; and
      e) He is not a manufacturer of such goods as may be notified by the Government
      On the recommendations of the Council.

      For further clarity on this query, I will give you an example which will help you in solving your query:
      A Hotel, which is registered under GST as Composite dealer supplies Fruits and Vegetables in addition to Food Items
      Then, Hotel is liable to pay GST on supplies of Food Items only (@5%) and the hotel is not liable to pay GST on Fruits and Vegetables supplied by them.
      As Fruits and Vegetables are Nil rated which is an Exempted Supply (Sec. 2(47) Exempted Supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply).

      1. DEVENDRA SHARDA says:

        I agree with first part of you reply but disagee of 2 nd part i.e. example given, because when we read section 10(1) of CGST act with Rule 7 of CGST rules we may conclude that trader will pay tax on TURNOVER OF TAXABLE SUPPLIES whereas manufacturer and restaurant owner will pay tax on TURNOVER means including exempted supplies

  4. Kollipara sundaraiah says:

    Any gst Composite scheme dealer gstr-4 return not enabled f.y.2019-2020 in gst portal.
    Composite dealer Gstr-4 return f.y.2019-2020 filed compulsory or not.

    1. Santhosh Gupta says:

      Hi Sir,
      GSTR-4 is only a Theoretical Return but in practice such return was not practically enabled.
      But a return named GSTR-9A is been introduced which is a Annul return for Composite dealers which is to be filed by 31st December following the close of the Financial Year.
      For your reference, i am herewith attaching the Forms which were notified by GST Council where the Form GSTR-4 is no where prescribed. (http://gstcouncil.gov.in/sites/default/files/Rules-dynamic/05.05.2020%20_CGST%20Rules%2C%202017_%28Part-B_Forms%29.pdf)
      I hope your query was resolved, for any further queries you may feel free to contact me at k.santhoshgupta29@gmail.com.

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