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A composition scheme is an optional scheme of levy of tax available for small taxpayers in the Goods and Services Tax (GST) regime. Under this scheme, tax is levied at a reduced rate with fewer compliances. Composition dealer, the person who opted for a composition scheme, needs to pay GST at a prescribed percentage of his turnover every quarter.

GST composition scheme turnover limit

The composition scheme turnover limit in GST is 1.50 crores that mean taxpayers whose turnover is less than this limit may apply for the composition scheme. In the case of the North-Eastern States and Himachal Pradesh, this limit is Rs 75 lakhs. Additionally, as per the amended CGST act, registered composition dealers can also provide services to the extent of Rs 5 lakhs.

List of persons who cannot opt for composition scheme in GST

(a) Suppliers whose aggregate turnover in the preceding financial year exceeds Rs 1.5 crore

(b) Inter-state supplier of goods

(c) Supplier of services other than restaurant services

(d) Any person engaged in making non-taxable supply

(e) Casual Taxable Person or Non-Resident Taxable person

(f) Manufacturer of pan masala, tobacco and, manufactured tobacco substitutes

(g) Manufacturer of ice cream and other edible ice

(h) Taxpayer engaged in any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52

Conditions for registering under GST composition scheme

(a) Input tax credit cannot be claimed

(b) Inter-state supply of goods is restricted*

(c) The word “Composition taxable person” must be mentioned on every bill of supply issued by the composition dealer

(d) The word” Composition taxable person” must be mentioned on every notice or signboard displayed at the place of business

(e) Tax paid cannot be collected from customers

(f) A taxable invoice cannot be issued. Bill of supply will be issued instead of tax invoice.

(g) Exempted/non-taxable goods cannot be supplied

*Note, composition dealers can purchase goods or services from other states but the supply of goods or services outside the state is restricted.

How to register for the composition scheme?

The option to pay GST under composition levy can be exercised prior to the commencement of the relevant financial year. Following steps need to follow to opt for a composition scheme-

Step 1: Visit the login page of GST official Website

Step 2: Enter login credentials

Step 3: After login, navigate to the “Services” > Registration > “Application to opt for Composition levy”

Step 4: On this screen,

  • Check the “Composition Declaration” box
  • Check the “Verification” box to confirm and declare that information given by you in the application is true and correct to the best of your knowledge
  • Select the “Name of Authorized Signatory” from the drop-down
  • Enter the “Place”
  • Click on the “Save” button
  • Submit your application using any of the three options available – “SUBMIT WITH DSC”, "SUBMIT WITH E-SIGNATURE", “SUBMIT WITH EVC”

Step 5: A Warning pop-up will be displayed on the screen. Click the “PROCEED” button. On the successful filing of an application for opting composition scheme, a success message will appear on the window and you will receive acknowledgment on your registered mobile number or email.

Format of Bill of Supply

Composition dealers cannot issue a tax invoice as they are not permitted to collect tax from customers. Dealer has to issue Bill of Supply specifying the particulars as given below-

(a) Name, address, and GST number of the supplier

(b) Bill of Supply number (a consecutive serial number not exceeding 16 characters)

(c) Issue date of the bill

(d) Name, address, and GST number of the recipient if the recipient is registered in GST law

(e) Description, Value (after adjusting discounts, if any), and HSN code of goods

(f) Signature or digital signature of composition dealer  

GST rates notified for composition dealer

S.No.

Category of person

CGST

SGST

Total

1

Manufacturers and traders

0.5%

0.5%

1%

2

Restaurant Services

2.5%

2.5%

5%

 

GST composition forms

Below is the complete list of GST forms involved in the composition scheme.

Form No.

Description

GST CMP-02

Registered taxpayers who opt for the composition scheme will have to intimate in form CMP-02 on the GST portal.

GST CMP-03

The composition dealer has to file form CMP-03 within 90 days from the date of filing CMP-02. This form contains the detail of stock held by the dealer on the date of registering in the composition scheme.

GST CMP 04

Composition dealer has to file form CMP-04 in the following cases –

(a) He voluntarily exits from the scheme

(b) Turnover exceeds the specified limit

(c) He fails to comply with any of the conditions of the scheme

GST CMP 05

Form CMP-05 is used by the officer to issue SCN to the dealer asking why he should be allowed for a composition scheme.

GST CMP 06

CMP-06 is filed by the taxpayer in response to notice received in form CMP-05. This form must be filed within 15 days from the date of receipt of CMP-05

GST CMP 07

Form CMP-07 is the order of acceptance or rejection issued by the proper officer in response to CMP-06 received from the taxpayer. A rejection order in CMP-07 is issued by an officer after giving an opportunity of being heard to the taxpayer.


Recent updates

03-Apr-2020

The last date to opt into the composition scheme for the FY 2020-21 in form CMP-02 has been extended up to 30th June 2020.


GST returns for composition dealer

Return

Description

Periodicity

Due date

CMP-08

Statement containing the details of payment of self-assessed tax

Every quarter or part thereof

18th of the month succeeding the quarter

GSTR-4

Annual return containing the summary of outward supplies, Inward supplies, import of services, and supplies attracting reverse charge

Every financial year or part thereof

30th day of April following the end of such financial year


Recent updates

28th May 2021

(i) GSTR-4 for FY 2020-21 can be filed up to 31st July 2021.

(ii) The maximum late fee for GSTR-4 is restricted to Rs.500 per return for nil filing and Rs. 2000 for other than nil filing.

1st May 2021

(i) The due date to file GSTR-4 for FY 2020-21 extended to 31st May 2021.

(ii) Relaxation is given in the interest charges for late filing of Form CMP-08  for January-March 2021. No interest for filing on or before 8th May, interest reduced to 9% between 9th May and 23rd May but charged at 18% thereafter.

15th February 2021

The due date for filing GSTR-4 return for FY 2020-21 is 30th April 2021.

31st August 2020

The last date for filing Form GSTR-4 for the FY 2019-20 from 31st August 2020 to 31st October 2020.

6th August 2020

Now, GSTR-4  can file using an excel-based offline tool on the GST portal.

21st July 2020

The facility to file GSTR-4 is now available on the GST portal. 13th July 2020 The due date to file GSTR-4 has been extended to 31st August.


 Difference between regular scheme and composition scheme

Basis

Regular scheme

Composition scheme

Registration

Mandatory if turnover exceeds the specified limit

Optional (Turnover must be less than 1.5 crores)

Input tax credit (ITC)

ITC can be reduced while paying GST

ITC cannot be reduced while paying GST

Compliances

More compliances

Fewer compliances

GST levy

Levy at higher rates

Levy at a fixed lower rate

Territory of business

Unlimited territory of business

Supplies can be made within the state only

GST collection

GST can be collected from customers

GST cannot be collected from customers

Invoicing

A tax invoice shall be issued

Bill of supply shall be issued instead of tax invoice

Causal taxable person or non-resident taxable person

Casual taxable person or non-resident taxable person should apply for GST registration online

Casual taxable person or non-resident taxable person cannot opt for a composition scheme

\Manufacturing activity

No restrictions

Manufacturing of ICE cream, pan masala, tobacco is prohibited

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