Composition Scheme is a voluntary and optional scheme with simpler returns and lesser compliance under GST. A business should take a Compulsory Registration under GST if it’s aggregate turnover in a financial year exceeds the threshold limit opted by the respective states. Such business can avail the benefit of Composition Scheme u/s 10 of the GST Act.
Features of Composition Scheme under GST
- If the Aggregate Turnover of business is up to Rs.1.5 Cr for goods and restaurant services (Rs.75 lacs for special category states) or Rs.50 lacs for other services during a financial year, it can opt for Composition Scheme.
- Taxpayer cannot collect GST from its customers on the sale of goods or services.
- Taxpayer cannot claim an Input Tax Credit of the GST paid on the purchase of goods or services.
- 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 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. A Composite Dealer should also file an annual return GSTR-9A on or before 31st December from the end of financial year.
- A composite dealer needs to pay tax at a fixed rate on its turnover. The tax rate is either 1%, 2%, 5% or 6% based on the nature of the business.
- Business should mention ‘composition taxable person’ on its notice boards and signboards.
- The taxpayer should mention ‘composition taxable person’ on the Bill of Supply issued to its customers.
- Any business that opts for composition scheme without meeting the prescribed conditions would be subject to a penalty by the GST department.
To opt for Composition Scheme on GST Portal, follow these steps:
1. Log in to GST Portal
2. Go to Services > Registration > Application to Opt for Composition Levy
3. Fill the form with required details and submit
Earlier, the benefit of the Composition Scheme was not available to taxpayers selling services except restaurant services. However, FY 2019-20 onwards, the benefit of the Composition Scheme was extended to taxpayers selling other services. If the aggregate turnover is up to Rs. 50 lacs, a service provider can opt for Composition Scheme and pay GST at the rate of 6%.