When the Aggregate Turnover of a business exceeds the threshold limit of registration under GST, they need to take Compulsory Registration. Such business can take benefit of the Composition Scheme under GST. It is a voluntary scheme under which there is less compliance.
It is important to note that a business must fulfill certain conditions to take benefit of the Composition Scheme. If the taxpayer fulfills the conditions, he/she is eligible to apply for registration under the Composition Scheme on GST Portal.
GST Composition Scheme v/s GST Regular Scheme
To analyse whether a business should register under the composition scheme or not, the following factors should be considered:
|Opt for GST Composition Scheme||Opt for GST Regular Scheme|
|Nature of Customers||Goods or services are supplied to unregistered dealers or composite dealers who are not ready to pay GST||Goods or services are supplied to registered dealers who are ready to pay GST|
|Claim Input Tax Credit||The taxpayer does not wish to claim input tax credit since the majority of purchase is from unregistered dealers or composite dealers||Taxpayer wishes to claim the input tax credit of GST paid on purchases from registered dealers|
|Type of Sales||Business making only Intra-state sales of goods i.e. sales within the state of registration||Business making Inter-state sales of goods i.e. sales outside the state of registration and exports of goods|
|Goods or Services||Taxpayer dealing in the sale of taxable goods or taxable services||Taxpayer dealing in the sale of non-taxable goods or non-taxable services|
|Record Keeping||Business wants to avoid record-keeping and accounting||Business can maintain accounting and record-keeping|
|E-Commerce Sales||A taxpayer has no plans to sell goods or services online through an e-commerce portal||Taxpayer plans to sell goods or services online through an e-commerce portal|
a. Trader of Goods = 1% ( CGST 0.5% & SGST 0.5%)
b. Manufacturer of Goods = 2% (CGST 1% & SGST 1%)
c. Restaurant Services = 5% (CGST 2.5% & SGST 2.5%)
d. Other Services = 6% (CGST 3% & SGST 3%)
No. The following type of persons cannot register under Composition Scheme of GST:
– Ice cream and other edible ice, whether or not containing cocoa
– Pan masala
– All goods i.e. tobacco and manufactured tobacco substitutes
The taxpayer has an option to opt in or opt out of Composition Scheme at the beginning of each financial year. Thus, you can register under regular scheme now and later opt in for Composition Scheme provided you are elegible to take benefit of Composition Scheme. However, this option cannot be availed in the middle of a financial year.