GST: Composition Scheme (under section 10 of CGST Act, 2017)

Word Composition is derived from a Latin word Componere, which means “Put Together”

It is a type of Indirect Tax in order to provide an comfort to the assessee from complying with the requirement of paying tax on the value addition by maintaining the detail of inputs and outputs, an option is provided to the assessee to opt for “put together scheme”.

The objective of composition scheme is to bring simplicity and to reduce the compliance cost for small taxpayers. The taxpayers having an aggregate turnover not more than Rs. 1 Crore (Rs. 75 Lakhs in Special Category Notified States) is eligible to opt for composition scheme.

Procedural Compliances for GST Composition Taxpayer

The Following are the procedural compliances which are required to be followed by every Composition Taxpayer :

• Aggregate Supply should not exceed Rs. 1 Crore/Rs. 75 Lakhs
• Bill of supply to issued instead of GST Invoice
• No GST shall be charged on invoice (i.e. not to be collected from recipient)
• No ITC shall be available
• Return is to filed in Form GSTR-4 quarterly upto 18^th of succeeding month of quarter end
• Inter-state supply is not allowed
• Tax is to be paid at Composite Rate

Meaning of Aggregate Supply for Composition Scheme under GST

The Aggregate Supply should include the following supplies :

(i) All Taxable Supplies

(ii) Exempt Supplies

(iii) Export of Goods or Services or both

(iv) Inter-state supplies of a person having same PAN

The Aggregate Supply should exclude the following supplies :

(i) Central Goods and Service Tax (CGST)

(ii) State Goods and Service Tax (SGST)

(iii) Union Territory Goods and Service Tax (UTGST)

(iv) Integrated Goods and Service Tax (IGST)

(v) Cess

(vi) Value of Inward Supplies subject to Reverse Charge

GST Rates to be applicable for Composition Taxpayers

Where the GST is to be paid by recipient of the Goods, the Time of Supply shall be EARLIER OF:

(i) Manufacturers other than those notified by government @0.50% CGST and 0.50% SGST/UTGST

(ii) Suppliers making supplies as referred to in clause (b) of para 6 of Schedule-II @ 2.50% CGST and 2.50% SGST/UTGST

(iii) Other Suppliers @ 0.50% CGST and 0.50% SGST/UTGST

Clause (b) of para 6 of Schedule-II states “supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.” The scope of this clause covers Restaurant, Catering, Mess or any other service contract where goods as food or drink is supplied for human consumption (other than alcoholic liquor for human consumption).

*As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of 10% of turnover, or `5 Lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019.

*CBIC has notified the increase in limit to Rs. 1.50 Crores from Rs. 1 Crore.

*As per 32nd GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax Scheme, and the Government has set the threshold turnover for service providers at `50 Lakhs to be eligible for this scheme.

Validity of Scheme of Composition Levy

The Scheme shall be valid upto which the assessee complies with the requirements of Section 10 under which the registration was granted under the said scheme.

However, in case of any, composition taxpayer contravenes the provision of Section 10 then option to pay tax under composition scheme shall lapse and he shall require to pay tax under Section 9(1) under Normal Levy. He shall issue GST Invoice instead of Bill of Supply from the date of cessation of Composition Scheme.

Further, he shall require to file an intimation for withdrawal in prescribed form within 7 Days from the cessation of Composition Scheme. The assessee shall be allowed to avail the benefit of Input Tax Credit in respect of stock of inputs and stock contained in semi-finished or finished goods held in stock and on capital goods held on the date of filing intimation of withdrawal.

Also, he is require to furnish a statement within 30 Days from the date of filing intimation of withdrawal of such option, containing the details of such stock held in prescribed form on the GST portal.

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