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Eligibility to opt for Composition Scheme under GST

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Sakshi Shah

Aggregate Turnover
Bill of Supply
GST
GSTR-4
Last updated on May 8th, 2020

Composition Scheme is a voluntary and optional scheme with less compliance for taxpayers who are required to take compulsory registration under GST. The Taxpayer can apply for Registration under Composition Scheme on the GST portal. Read about the eligibility to opt for Composition Scheme under GST – who can opt for it and who cannot opt for it.

Who can opt for Composition Scheme under GST?

If the aggregate turnover of business during the financial year does not exceed Rs.1.5 Crore for goods and restaurant services (Rs.75 lacs for special category states) and Rs.50 lacs for other services, it can avail the benefit of composition scheme u/s 10 of the GST Act.

Following points must be noted:

Who cannot opt for Composition Scheme under GST?

When can a seller opt for Composition Scheme?

Check the eligibility of seller of goods or services to opt for Composition Scheme under GST.

Sale of Goods

Taxable Goods Intra-State Sale Eligible
Taxable Goods Inter-State Sale Not Eligible
Non-Taxable Goods Intra-State Sale Not Eligible
Non-Taxable Goods Inter-State Sale Not Eligible

Sale of Services

Taxable Services Intra-State Sale Eligible
Taxable Services Inter-State Sale Eligible
Non-Taxable Services Intra-State Sale Not Eligible
Non-Taxable Services Inter-State Sale Not Eligible

FAQs

Can a person who has opted to pay tax under the composition scheme eligible to avail Input Tax Credit (ITC) on his inward supplies?

No. A taxable person opting to pay tax under the composition scheme is out of the credit chain. He/she cannot claim input tax credit on inward supplies. When he switches over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.

What are the consequences if a person who is not eligible opts for the composition scheme? 

If a taxable person has paid tax under the composition scheme without being eligible, taxpayer would be liable to penalty. Provisions of section 73 or 74 shall be applicable to determine tax and penalty.

What is the tax rate for taxpayer under Composition Scheme?

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%

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