Composition Scheme Under GST

October 27, 2020
  • Share:

What is GST Composition Scheme?

The composition scheme under GST is an implementation for the taxpayers from small businesses. GST filing can be a long and tedious process. To avoid the huge paperwork and lengthy procedure, a business can opt for the GST composition scheme.

In this scheme, a taxpayer files for taxes on a quarterly as well as a yearly basis instead of the regular three months return and annual return.

 

Who can apply for the GST Composition Scheme?

Any owner of a small business, who has a turnover of not more than ₹ 1.5 crores is eligible to apply for the composition scheme in GST.

In the state of Himachal Pradesh and the North-Eastern states of India, the owners of a small business whose turnover is not more than ₹ 75 lakh can apply for the scheme.

 

Businesses That Come Under the Scheme

The following businesses are eligible to apply for the GST composition scheme:

  1. A casual taxpayer,
  2. A non-resident taxpayer,
  3. Manufacturer of

                      i. Ice-cream or any edible ice with or without cocoa,

                      ii. Pan Masala, and

                      iii. Tobacco.

  1. A business making interstate supplies, and
  2. E-commerce operators.

 

How to apply for the composite scheme?

If you are a taxpayer who is eligible to be a part of the composition scheme, you can file the GST CMP-02 with India's government. This form is available to be filled in the GST Portal online.

The scheme asks for the taxpayers to apply every financial year for the same.

 

Benefits of GST Composition Scheme

  1. Low Compliance: There is less compliance to be followed. The taxpayers need to file lesser times than the casual payers, which reduces the paperwork.

 

  1. Reduced Payments: The liability of the taxpayers has reduced with the introduction of the composition scheme under GST rates.

 

  1. Liquidity: Due to the reduced tax rates, the businesses pay lesser tax, which increases the business's liquidity.

  📢 Accounts Outsourcing Services

 GST Rates Under The Composition Scheme

Type of Business

CGST

SGST

Total

Manufacturer or trader of goods

0.5%

0.5%

1.00%

Manufacturer or trader of services

2.5%

2.5%

5%

Other services

3.0%

3.0%

6.0%

 

 Regulations With GST Composition Scheme

  1. Any taxpayer who comes under and has opted for the composition scheme gst cannot levy the customers' tax amount.
  2. Only the manufactures of the taxable products under GST can be a part of the scheme.
  3. If the company owner has different brands under the same PAN number, the businesses are to be collectively applied for the scheme.
  4. The business should make it clear to the customers on its signboard that they are a composite taxable person.
  5. The mark of “composite taxable person” is to be on every bill of supply issued by the business.

 

Limits of the GST Composition Scheme

The business should have a turnover of not more than ₹ 1.5 crores in the current Financial Year for manufacturers.

For manufacturers already registered, the turnover must not exceed ₹ 1.5 crores in the Previous Year.

Any Restaurant whose turnover in the current Financial Year, or the Previous Financial Year, if already applied, exceeds ₹ 1.5 crores, it is eligible for the scheme.

Any newly registered service provider whose turnover is less than ₹ 50 lakh in the current financial year or ₹ 50 crores for the already registered business in the Previous Financial Year can apply for the composition scheme under GST for services.

 

Who Are Excluded From the Composition Scheme?

Any person or business who

  1. Supplies goods and services not leviable under the Act,
  2. Supplies good other than intrastate supplies,
  3. Import or Export from the country,
  4. Supplies goods from Electronic Commerce Operator, and
  5. Manufactures such goods that are mentioned above

are not eligible to apply for the composition under GST.

 

FAQs

  1. Does a Composition dealer maintain records?

- A composition dealer doesn't need to maintain records. However, if it is a registered company, the dealer will have to maintain records mandatorily.

 

  1. Can a business that is under the scheme avail Input Tax?

- Any business that comes under the composition scheme in GST cannot charge the customers' tax amount. They need to pay taxes from their earnings.

 

  1. What is the limit for the scheme?

- The businesses with a turnover of only less than ₹ 1.5 crores can apply for the scheme.

 

  1. Who files for the GST if the business is under the scheme?

- The person providing ca services for the company files the GST for the company.

 

  1. Where to find a CA for the same?

- If you do not already have a CA, you can find one online. Searching for ca near me on google can give you access to a list of good Chartered Accountants.

  

  1. How can a composite dealer raise a bill?

- A composite dealer pays taxes from their earnings and does not avail it in the sale. Hence, they cannot make a tax invoice. The dealers issue a bill called the “bill of supply” which clearly states that he or she is a composite taxpayer.

 

  1. What documents does a composite dealer prepare to file a return?

- Any business that comes in the composition scheme under gst has to prepare a quarterly statement CMP08 every quarter before the 18th of the month.

- An annual GSTR-4 is filed before the 30th of April every year and GST-9A before the 31st December every year.

 

  1. Can a composite dealer purchase from the interstate supplier?

- Yes, there is no restriction for a composite dealer to make a sale or purchase with another composite dealer.

 

  1. Are there any demerits of the composition scheme?

- Any composite dealer cannot do the following tasks:

a.      Making money for the tax as Input Tax Credit. The composite taxpayer has to pay taxes from his pocket.

b.      The taxpayer cannot be involved in the supply of non-taxable goods, as stated in the GST Act.

 

  • Share: