What are the advantages of registering under the Composition Scheme in GST?

Registration under the Composition Scheme in GST has its own set of advantages and drawbacks. Based on the situation of the business, the advantages and disadvantages must be carefully assessed to decide whether to opt for composition scheme on GST Portal or not.

Advantages of GST Composition Scheme

  • Less Record Keeping
    Composite Dealer need not maintain detailed records and accounts. The taxpayer can focus on running a business effectively rather than worrying about accounting and record keeping.
  • Less Returns
    While other taxpayers need to file monthly returns, a composite dealer needs to make quarterly payment of tax in Form CMP-08 and file an annual return GSTR-4 for a financial year. Thus, the compliance burden is lesser.
GST Return Filing for Composite Dealer (Annual Plan)
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  • Limited Tax Liability
    The tax rate under Composition Scheme is 1%, 2%, 5% or 6% of the turnover which is negligible in comparison to regular dealers who generally pay GST at 5%, 12%, 18% or 28%. However, the regular dealers can claim the Input Tax Credit of GST paid on purchases.
  • High Liquidity
    A composite dealer has to pay tax at a lesser rate than regular dealers. The payment of tax is to be done every quarter. Thus, there would be an easy flow of funds with high liquidity in the business.
  • Competitive Advantage
    Under the composition scheme, the dealer cannot collect tax from its customers. Thus, they can sell goods at a lesser price than the competitors who charge GST from the customers.

FAQs

When to file return under composition scheme in GST?

FY 2019-20 onwards, a Composite Dealer should file GSTR-4 on an annual basis on or before 30th April from the end of the financial year. They should now pay tax on a quarterly basis under Form GST CMP-08. Earlier up to FY 2018-19, GSTR-4 was filed quarterly or before the 18th of the month from the end of a quarter.

What is the eligibility category for opting for composition levy?

The Composition Scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross the following threshold limit:
a. Sale of Goods and Restaurant Services – Rs. 1.5 Cr for normal category state
b. Sale of Goods and Restaurant Services – Rs. 75 lacs for special category state
c. Sale of Other Services – Rs. 50 lacs

Which are the Special Category States in which the turnover limit for Composition Levy for Central tax and State tax purpose shall be Rs.75 lacs? 

In the case of the following States, the limit of turnover is Rs. 75 lakhs:
1. Arunachal Pradesh
2. Assam
3. Manipur
4. Meghalaya
5. Mizoram
6. Nagaland
7. Sikkim
8. Tripura
9. Himachal Pradesh
10. Uttarakhand
11. Jammu & Kashmir

Is it mandatory for a Composition Dealer to maintain detailed records?

No, it is not mandatory for a registered Composition dealer to maintain detailed records as needed by a normal taxpayer.

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    You can opt out of Composition Scheme from your account on GST Portal. Once the taxpayer type is updated to Regular in your profile, you can start filing GST Returns under the regular scheme. If you are facing any issues while making the withdrawal application, you can create a grievance on the GST Portal.

    Do let us know if you have any further queries.

  2. I want to be able to claim input tax credit for GST paid. Should I opt for the GST composition scheme or regular scheme?

  3. Hey @Joe_Fernandes

    If you wish you claim Input tax credit, you should opt for GST Regular Scheme.

    Read more about the difference here.