The concept of Composition scheme under GST regime is same as under current tax structure. Unlike under present tax structure, the provisions governing the Composition Scheme is altogether different. This scheme is basically designed for small dealers, for which maintaining records, making payments and filing returns is a cumbersome process and a bit costly affair. It is a hassle free process for small players.
In this write-up, the overview of this scheme will be discussed.
Introduction
Section 10(1) of CGST deals with ‘Composite Levy’, which says, a registered person, whose aggregate turnover in the preceding financial year did not exceed seventy five lakh* rupees, may opt to pay, in lieu of the tax payable by him.
From above definition, broadly following two points can be concluded:
- Registered person having aggregate turnover exceeding seventy five lakh rupees, not eligible to opt this scheme;
- Registration under this scheme is optional
*As per the latest notification of GST, its being notified that for the following Special Category States, turnover limit is fifty lakh rupees only, except Uttarakhand:
1. Arunachal Pradesh,
2. Assam,
3. Manipur,
4. Meghalaya,
5. Mizoram,
6. Nagaland,
7. Sikkim,
8. Tripura, and
9. Himachal Pradesh
| COMPOSITION SCHEME IS OPTIONAL IN NATURE, IT IS NOT MANDATORY TO OPT IN FOR THIS SCHEME. |
Let’s go through its related provisions:
Eligibility criteria
The registered person shall be eligible to opt under this scheme, if he satisfies following conditions:
(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
(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
Rate of tax of the composition levy
| Category of registered persons | Rate of tax | CGST component | SGST component |
| Traders | 1% | 0.5% | 0.5% |
| Manufacturer | 2% | 1% | 1% |
| Restaurants | 5% | 2.5% | 2.5% |
Conditions and restrictions for composite dealer
The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:
– he is neither a casual taxable person nor a non-resident taxable person;
– the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 3;
– the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section (4) of section 9;
– he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both;
– he was not engaged in the manufacture of goods as notified under clause (e) of sub-section (2) of section 10, during the preceding financial year;
– he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and
– he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
| Following manufacturers are out of the purview of composition scheme:
– Ice cream and other edible ice – Pan Masala – Tobacco and manufactured tobacco substitutes |
Form and manner of submission of quarterly return
(1) Every registered person paying tax under section 10 shall, on the basis of details contained in FORM GSTR-4A, and where required, after adding, correcting or deleting the details, furnish the quarterly return in FORM GSTR-4 electronically through the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner.
(2) Every registered person furnishing the return above, shall discharge his liability towards tax, interest, penalty, fees or any other amount payable under the Act or these rules by debiting the electronic cash ledger.
(3) The return furnished above, shall include, inter alia,-
– invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and
– consolidated details of outward supplies made
Withdrawal from the Scheme
The registered person who intends to withdraw from the composition scheme shall, before the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or verified through electronic verification code, electronically on the common portal.
Non availability for Input Tax Credit
The person opting for Composition scheme is not eligible to take Input Tax Credit.
No need to file fresh intimation every year
The registered person paying tax under composition scheme may not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and these rules.
List of composition formats
| Sr. No. | Form No. | Description |
| 1 | GST CMP-01 | Intimation to pay tax under section 10 (composition levy) (Only for persons registered under the existing law migrating on the appointed day) |
| 2 | GST CMP-02 | Intimation to pay tax under section 10 (composition levy) (For persons registered under the Act) |
| 3 | GST CMP-03 | Intimation of details of stock on date of opting for composition levy (Only for persons registered under the existing law migrating on the appointed day) |
| 4 | GST CMP-04 | Intimation/Application for withdrawal from composition Levy |
| 5 | GST CMP-05 | Notice for denial of option to pay tax under section 10 |
| 6 | GST CMP-06 | Reply to the notice to show cause |
| 7 | GST CMP-07 | Order for acceptance / rejection of reply to show cause notice |
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| 30th SEPTEMBER, 2017 IS THE LAST DATE TO OPT IN OR TO OPT OUT FOR COMPOSITION SCHEME |
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Author: C S Ekta Maheshwari is the Author of this article and is Company Secretary by profession. The Author can be reached at csektamaheshwari14@gmail.com
Disclaimer:
The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.
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