Under the GST laws, a composition scheme was introduced as an alternative method of levying tax framed for small taxpayers. Businesses with an aggregate turnover of up to 100 lakhs can opt for composition scheme by paying tax at a predetermined rate which is fixed on their gross turnover. However, a person opting for composition scheme cannot avail the benefit of input tax credit.
Currently, manufacturers, traders and restaurants (supplying non-alcohol drinks) can opt for the GST composition scheme. The rate of tax rate prescribed under the composition scheme is 1% (0.5% CGST and 0.5% SGST) for manufacturers and traders, and 5% (2.5% CGST and 2.5% SGST) for restaurants. Before October 2017, the prescribed rate of tax under this composition scheme for manufacturers was 2% (1% CGST and 1% SGST), and for traders and restaurants, the rate was same 1% (0.5% CGST and 0.5% SGST).
The following are the conditions that must be fulfilled in order to opt for GST composition scheme:
How to opt GST Composition Scheme?
Intimation of opting for composition levy
Every person opting for registration under GST law for the first time is required to give the intimation for the composition levy. Where a person applies for the GST registration for the first time has an option to pay tax under composition scheme in Part ‘B’ of the registration FORM GST REG-01. The same shall be considered as an intimation given by the applicant to pay tax under Composition scheme. However, such intimation shall be taken care of only after the granting the registration to the applicant. The option to pay tax under composition scheme shall be effective from the date from which registration becomes effective.
Where a person is already registered under GST law is also required to give an Intimation to pay tax under the composition scheme. A registered person opting for composition scheme is required to file intimation electronically in the prescribed form on the Common Portal. However, such intimation needs to be furnished prior to the commencement of the Financial Year for which said the option is exercised.
The registered person is also required to furnish the statement in the prescribed form as per the provisions contained under CGST Rules, 2017 within 60 (SIXTY) days from the commencement of the relevant Financial Year. Any intimation given in respect of any place of business in a State/Union Territory shall be treated as an intimation in respect of all other places of business registered on the same PAN.
Details of stock to be furnished:
Any person who files such intimation is also required to furnish the details of:
Stock held by him (whether purchased from registered or unregistered suppliers) on the day prior to the date from which he opts for composition scheme,
The option to pay tax under the composition scheme shall be effective from the beginning of the Financial Year.