Composition Scheme under GST

For taxpayers having annual turnover less than 1.5 Crores, composition scheme is available under GST which is easy to comply. Want to know more ?
Composition Scheme gives relief to small taxpayers from the complexities of GST.
It is a simple and easy scheme that can be opted by small taxpayers so that the compliance burden on them is reduced significantly.

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​Here we will look at all the provisions relating to the Composition levy under GST.

​1.Who is eligible under Composition Scheme :

​As per Section 10 of the CGST Act, any trader, manufacturer, or service provider can opt for a composition scheme having a turnover of up to Rs.1.5 Crore (the limit has been increased from 1 Cr.)
​The limit of turnover is Rs.75 lakhs only for the North Eastern States and Himachal Pradesh.

​2. Persons who are not eligible for Composition Scheme :

​The following categories of persons will not be eligible for opting composition scheme :
​(a) If a person is engaged in the supply of goods or services which are exempt under the Act;
​(b) If a person is engaged in the supply of goods or services which are inter-state i.e. outside the state.
​(c) If a person is engaged in the supply of goods or services through an E-commerce operator who is required to deduct tax at source;
​(d) If a person is a casual taxable person or a non-resident taxable person;
​(e) If he is engaged in the manufacture of such goods which are specifically excluded ;
​(I) manufacturer of Ice-cream and other edible ice, whether or not containing cocoa,
(ii) manufacturer of Pan Masala
(iii) manufacturer of Tobacco and Tobacco Substitutes;
Thus a trader of the above goods can opt for a composition scheme.
​Thus a composition dealer can purchase goods or services from inter-state. There is no restriction on the same.

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​3. How the Turnover limit is calculated for eligibility of Composition Scheme :

​The aggregate turnover will include all turnover i.e. taxable as well as exempt turnover but will not include the value of exempt supplies provided by way of loans and deposits and consideration is received by way of Interest and Discounts.
​If two or more registered persons is having the same PAN, then all the registered persons will have to migrate to the composition scheme.

​4. Rate of Tax for different categories of Persons covered under Composition levy :

​(a) Manufacturers other than as notified above 1% (0.5% CGST and 0.5% SGST)
​(b) Restaurant Services 5% (2.5% CGST and 2.5% SGST)
​(c) Traders or others eligible for this Scheme 1% (0.5% CGST and 0.5% SGST)
​(d) Goods and Services provided that the 1% (0.5% CGST and 0.5% SGST) turnover of services does not exceed 10% of total
turnover of previous year or 5 lacs whichever is higher
​(e) Goods or Services (Mixed Supply) such that 6% (3%CGST and 3% SGST) total turnover is less than 50 lacs (Applicable w.e.f 01-04-2019)

​5. Can a Regular Taxpayer shift to Composition Scheme, if so when and how?

​Yes, a taxpayer who is registered under the regular scheme can shift to a composition scheme but the same can be done from the start of the financial year only. For this purpose, he has to file Form GST CMP-02 before the beginning of the Financial year.
For example, if a regular taxpayer wants to shift to a composition scheme from 1st April 2021, he shall file the form GST CMP-02 on or before 31st March 2021.
​For shifting in this scheme, the taxpayer is required to pay the input tax credit which is lying in the case of stock, other inputs of semi-finished and finished goods, and inputs held in capital goods as on the date immediately preceding the day of opting for the scheme.
​For this purpose, Form ITC-03 has to be furnished within 60 days of the start of the financial year from which the option to shift under the composition scheme has been exercised.

​6. Can a composition taxpayer shift to a regular scheme, if so when and how?

​Yes, the composition taxpayer can shift to the regular taxpayer by filing Form GST CMP-04. The date of shifting can be any date but it shall not be before the start of the financial year in which the option is exercised to opt-out of the scheme.'
​He is also required to file Form GST ITC-01 within 30 days of opting out of the scheme declaring the input and input credits held on stocks and capital goods in semi-finished and finished goods. The form ITC-01 needs to be certified by a Chartered Accountant or Cost Accountant if the value of input tax credit is more than 2 lacs.
​However, in the case of capital goods held, the value of input tax credit will be reduced by 5% for each quarter for the total period for which the asset has been held.

​7. What are the Returns which are required to be filed by the Composition Taxpayer?

​A composition taxpayer gets substantial relief from the filing returns under GST.
​He is required to file a quarterly return in Form CMP-08 within 18 days from the end of the quarter. Also, the taxpayers have to pay the applicable tax on or before the filing of return in Form CMP-08.
​Also, he is required to file a yearly return in Form GSTR-04 within 30 days i.e. on or before 30th April every year.
​The late fee for non-filing of return is Rs.100 per day subject to a maximum of Rs.5000/- under CGST and SGST Act both i.e. Rs.10000/- per return whichever is lower.