GST Portal : Withdraw from Composition Scheme

In order to opt-out of the Composition Scheme, the taxpayer has to file an intimation. File the intimation to withdraw from the composition scheme in the Form GST CMP-04 on GST Portal. The Taxpayer will also have to provide details of the stock of inputs, inputs contained in semi-finished and finished goods in form GST ITC-01. Further, submit details within a period of 30 days from the date of filing an intimation.

Effect on Input-Tax Credit (ITC) – withdraw from Composition Scheme

Once the taxpayer opts out of the Composition Scheme, they enter the regular scheme of taxation under GST. Furthermore, taxpayers are eligible to claim Input Tax Credit (ITC) on their purchases after opting-out. ITC is available subject to the following conditions:

  1. The ITC claimed on purchasable goods are for producing taxable supplies.
  2. The ITC claimed on the basis of the invoices/documents should be available.
  3. The date of the invoice should be within 12 months from the appointed date.
  4. Reduce the credit on capital goods by such percentage points as may be prescribed.

GST Portal – Steps to withdraw from Composition Scheme

  1. Login to GST Portal

    Login to your account on GST Portal using valid username and password

  2. Navigate to Application for Withdrawal from Composition Scheme

    Go to Services > Registration > Application for Withdrawal from Composition Scheme

  3. Application Page

    We move to the Intimation/Application for Withdrawal from Composition Levy page.
    * Date – Select appropriate date from calendar. The date for withdrawal from Composition Levy cannot be before the date on which Composition Levy was opted.
    * Reason – Select the reason for withdrawal from the drop-down list.

  4. Verification

    Click on the verification check-box. Select Name of the Authorized Signatory, enter Place and click on Save.

  5. Submit Application

    You can submit the application either using EVC option or using DSC. DSC requires the emSigner software for the GST Portal.

Submit using DSC

  • Click on “Submit with DSC” option. A Warning message will appear on the screen. Click on “Proceed” to move forward
  • The emSigner window appears on the screen. Select the desired signature required for the application and click on Sign

Sign using EVC

  • Click on the option Submit with EVC
  • The system sends an e-mail and SMS to the registered e-mail address and mobile number with an OTP
  • Enter the OTP
  • Once the authentication is complete, you will receive a success message. The system will generate an ARN and send it to the registered e-mail and SMS in next 15 minutes

Check Updated Status in Profile

Taxpayer can confirm the change by visiting profile on GST Portal. Go to the section ‘Taxpayer Type’. The status changes from ‘Composition’ to ‘Regular’. The taxpayer will now have access to all returns applicable to regular taxpayers.

FAQs

Is a Composition Dealers allowed to avail Input Tax Credit?

No, the Composition dealer is not allowed to avail Input Tax Credit. A taxpayer who opts to pay tax under the composition scheme cannot take credit on his input supplies.

How is availed input tax credit (ITC) treated when one switch on to Composition Scheme from the normal scheme?

In such a case when a person switches on to the composition scheme from the normal scheme, he/ she becomes accountable to pay an amount equal to the credit of input tax in terms of inputs present in stock on the day instantly after the date of the switchover. The remaining balance of input tax credit in the credit ledger after payment of such amount will be treated inconsiderable.

Can I choose for Composition Scheme in one year and change it in the later year?

Yes, You are allowed to switch between the Composition Scheme and the normal scheme on the basis of your turnover. The same switchover can be declared on the GST Portal. However, this flip flop comes along with alterations in the way you issue invoices and file your returns

GST Portal : Opt For Composition Scheme

It is a voluntary and an optional scheme with simpler returns and lesser compliance under GST. A business is compelled to register under GST if their aggregate turnover in a financial year exceeds the threshold limit. The threshold limit for the Composition Scheme of the goods and restaurant services is at 1.5 Cr. (Rs.75 lacs for special category states) and Rs.50 lacs for other services during a financial year. Businesses can opt for Composition Scheme on the GST Portal.

GST Portal – Steps to Opt In for Composition Scheme

  1. Login to GST Portal

    Login to your account on GST Portal using valid username and password

  2. Navigate to Application to Opt for Composition Scheme

    Go to Services > Registration > Application to Opt for Composition Scheme

  3. Application Page

    The application page will display various details such as GSTIN and the legal name of the business, jurisdiction, address etc of the business

  4. Composition Declaration & Verification

    Click on the check-box. This indicates that you abide by the conditions and restrictions of Taxpayers who are under this scheme.
    Click on the “Verification” check-box. This states that the information given by you is true. Furthermore, you haven’t concealed any information from the authority.

  5. Verification tab

    Before the submission of the application, you have to provide details such as “Name of Authorized Signatory” and “Place”. Submit the application using EVC or DSC (Digital Signature Certificate).

  6. Warning Message

    As a result of the submission of the application, we receive a “Warning” message. Click on “Proceed” to move forward

  7. Sign with DSC

    If you need to submit the application using DSC, move to the emSigner Window. Select the desired signature required for the application and click on “Sign”

  8. Success Message

    After the completion of the DSC authentication, you will receive a Success message. An ARN will be generated and sent to your registered e-mail and SMS in next 15 minutes.

FAQs

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%)

Can the service provider go for the Composition Scheme?

Yes, the Composition Scheme for services (other than restaurant services) has been introduced with an initial limit of Rs 50 Lakh, taxable at 6%, beginning from April 1, 2019. In the case of Restaurant Services, the threshold limit is Rs. 1.5 Cr (Rs. 75 lacs for special category states) taxable at 5%.

What are the different types of returns a Composition Dealer has to file?

A Composition Dealer has to file one return i.e. GSTR-4 on an annual basis, GST CMP-08 on a quarterly basis.

CMP-08 GST: Meaning, Due Date, Late Fee, Steps to File

The GST department issued a notification in April 2019 to introduce Form CMP-08. It replaced Form GSTR-4 i.e. GST Return for business under Composition Scheme. Form CMP-8 is applicable from FY 2019-20.

What is CMP-08 in GST?

Form CMP-08 is the statement with details of self-assessed tax payable of a dealer registered under the Composition Scheme. The form contains details of tax liability on sales and purchases (under the Reverse Charge Mechanism). This form has replaced Form GSTR-4.
The Composite Dealer needs to file CMP-08 on a quarterly basis on the GST Portal. He can calculate the tax liability and pay it online on the GST Portal. If there is no tax liability during the quarter, a Nil return should be filed.

CMP 08 Due Date

A Composite dealer should file Form GST CMP-08 on a quarterly basis. The due date to file is 18th of the next month from the end of the quarter. It was applicable from FY 2019-20. The Due Dates for FY 2019-20 are as follows:

Period 

Due date

Oct-Dec 2020

18th January 2021

Jan-Mar 2021

18th April 2021

Apr-Jun 2021

18th July 2021

Jul-Sept 2021

18th Oct 2021

GST Late Fees – CMP-08

If the taxpayer does not file GST CMP-08 on or before the due date, he is liable to pay a Late Fee for each day of delay.

  • If there are no transactions in the return period, the taxpayer should file a NIL Return to avoid late fee and penalty
  • Late fee is calculated from the date after the due date up to the date of filing of the return
  • A late fee of Rs.200 (CGST Rs.100 and SGST Rs.100) per day of delay is applicable. The maximum late fee that can be charged is Rs. 5000 per return

Note: While the GST Rules mention a late fee of Rs. 200 per day in the case of CMP-08, there is no option to enter such a late fee under the option of paying tax in CMP-08. Also, the GST Portal does not auto calculate late fees in the case of CMP-08, unlike other GST Returns.

How to file CMP-08?

  1. Visit to GST Portal

    Login to your account on the GST Portal

  2. Navigate to Returns Dashboard

    Go to Services > Returns > Returns Dashboard OR click Returns Dashboard link on the dashboard.

  3. Select Financial Year and Return Filing Period

    Select the financial year and return filing period. On tab, ‘Payment of self-assessed tax’, select Prepare Online.

  4. Summary of Self-Assessed Tax Liability

    The summary of self-assessed tax liability appears on the screen. It reflects the tax liability on sales, tax liability on purchases falling under reverse charge mechanism, and interest payable.

  5. File a Nil Return CMP-08

    To file a Nil Return, select the checkbox – File Nil GST CMP-08. Once you select the checkbox, a list of conditions to file Nil Return appears. Make sure you meet the conditions.

  6. Tax Liability & Interest

    Enter the tax liability and interest. Click on Save, a success message will appear on the screen.

  7. Preview Draft GST CMP-08

    To download the draft, click on Preview Draft GST CMP-08. Review the details before proceeding.

  8. Payment of Tax

    Click on Proceed to File. A page showing Payment of Tax will reflect on screen.

  9. Cash Balance in Electronic Cash Ledger

    The cash balance available in the Electronic Cash Ledger is reflected.
    * If the available balance in E-Cash Ledger is more than the tax liability – proceed with next step.
    * If the available balance in E-Cash Ledger is less than the tax liability – click on Create Challan. Pay the GST Challan and proceed with filing return.

  10. File using DSC or EVC

    Select the checkbox, select authorised signatory and click on File GST CMP-08. File the return using DSC or EVC.

  11. Success Message with ARN

    Once you file the return, a success message will appear with the ARN i.e. Acknowledgement Reference Number. To download the filed return, Click on Download Filed GST CMP-08.

FAQs

Can I pay the tax liability under CMP-08 by using Input Tax Credit?

A dealer registered under Composition Scheme cannot claim Input Tax Credit. Thus, the tax liability under CMP-08 cannot be paid using Input Tax Credit. The Composite Dealer can pay the liability only through depositing cash in the E-Cash Ledger.

What is Negative Liability Adjustment in CMP-08?

Negative Liability Adjustment means if there is any negative entry in the return of a present quarter, it will be carried forward to the next quarter. The taxpayer can adjust this negative entry with the tax liability in the return of next quarter. Such negative entry is reflected under the column ‘Adjustment of negative liability of previous tax period’ in the CMP-08 of next quarter.

Is it mandatory for taxpayer under Composition Scheme to file CMP-08 on GST Portal?

Yes. It is mandatory for a dealer registered under Composition Scheme to file CMP-08 every quarter. Even if there is no business or no self-assessed tax liability, the Composite Dealer must file CMP-08 on the GST Portal.

GST Annual Return for Composition Taxpayers : GSTR-9A

What is GSTR-9A?

GSTR-9A is the Annual Return that a composition taxpayer under GST needs to file once for each financial year. It comprises of details of sales, purchases, taxes paid, demand created, refund claimed and the input tax credit availed or reversed on opting out or opting in for Composition Scheme.

Who should file GSTR-9A?

  • The taxpayers registered under the Composition Scheme
  • Taxpayers who have shifted from Composition scheme to Regular scheme any time during the financial year
  • Taxpayers who have shifted from Regular scheme to Composition scheme any time during the financial year

The following taxpayers should not file GSTR-9A:

  • Taxpayers registered under regular scheme who did not opt for composition scheme during the financial year
  • NRTP i.e. Non-Resident Taxable Persons
  • ISD i.e. Input Service Distributor
  • CTP i.e. Casual Taxable Person
  • TDS Deductor i.e. persons required to deduct tax at source
  • E-Commerce Operator or TCS Collector i.e. persons required to collect tax at source

When should I file GSTR-9A under GST?

Due Date to file the return is 31st December of the next financial year. However, the GST council extended the due date of FY 2017-18.

Due Date to file GSTR-9A for FY 17-18
is 30th June 2019
Due Date to file GSTR-9A for FY 17-18
is 30th June 2019

How much is the Late Fee for filing return after the due date?

If the taxpayer does not file the return on or before the due date, he is liable to pay a Late Fee of INR 200 (CGST INR 100 and SGST INR 100) for each day of delay. The Late Fee is calculated from the date after the due date up to the date of filing of the return.

What information is required to be reported under GSTR-9A?

Following basic details of the taxpayer are auto-populated:

  • Financial Year – Enter the financial year for which the taxpayer files the return
  • GSTIN i.e. GST Identification Number of the taxpayer
  • Legal Name and Trade Name of the business

Following details are auto-filled based on the GSTR-4 filed during the financial year:

Other required information:

  • Details of tax paid during the financial year
  • The details of demands paid and refunds claimed during the financial year
  • The details of input tax credit availed or reversed due to opting in or out of composition schem

FAQs

Do I need to file GSTR-9A if my registration has been cancelled in the financial year?

A taxpayer who has an Active GSTIN during the financial year even for a single day must file the annual return on GST Portal. Thus, even if the registration is cancelled, the taxpayer must file annual return i.e. GSTR-9 or GSTR-9A

Can I file Nil GSTR-9A?

A taxpayer can file Nil GSTR-9A if:
1. There are no outward supplies i.e. sales
2. There are no inward supplies i.e. purchases
3. The taxpayer does not claim any refund
4. The taxpayer does not claim any input tax credit
5. There is no liability to be reported
6. There is no outstanding demand
7. No late fee payable

GST Registration Types

GST Registration means applying for a unique GST Number or GSTIN i.e. GST Identification Number on the GST Portal. The taxpayer requires GSTIN to collect and pay GST on the outward supplies i.e. sales and claim GST input tax credit on the inward supplies i.e. purchases. Types of GST Registration depends on the nature of the business.

Types of GST Registration

  1. Compulsory Registration
    Under certain situations, the dealer must take Compulsory Registration under GST irrespective of the turnover. For eg: inter-state sales of taxable goods, e-commerce operator, e-commerce seller, etc
  2. Voluntary Registration
    A business that does not need to apply for compulsory registration can apply for registration on a voluntary basis. It is called Voluntary Registration under GST.
  3. Registration under Composition Scheme
    If the aggregate turnover exceeds the prescribed threshold limit of Rs.40 lacs (Rs.20 lacs for special category states) for goods or Rs.20 lacs (Rs.10 lacs for special category states) but is less than Rs.1.5 Cr (Rs.75 lacs for special category states), the dealer can register under Composition Scheme. In case of services, if the aggregate turnover exceeds Rs.20 lacs (Rs.10 lacs for special category states) but it is less than Rs.50 lacs, the dealer can register under the Composition Scheme. Under this scheme, the taxpayer should pay GST at a fixed rate on turnover and the compliance is lesser than in case of normal registration.
  4. No Registration
    The following category of persons do not require GST Registration:
    • The business for which aggregate turnover during the financial year does not exceed Rs.40 lacs for goods (Rs.20 lacs for special category states) or Rs.20 lacs for services (Rs.10 lacs for special category states).
    • The business that does not fall under the provisions of compulsory registration.
    • Persons selling goods or services that are exempt under GST or not covered under GST.
    • Agriculturists for the supply of crops produced from the cultivation of land.
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FAQs

What are the special category states under GST?

The following are the special category states under GST to which the threshold limit for registration is lesser.
1. Arunachal Pradesh
2. Assam
3. Jammu & Kashmir
4. Manipur
5. Meghalaya
6. Mizoram
7. Nagaland
8. Sikkim
9. Tripura
10. Himachal Pradesh
11. Uttarakhand

What is Aggregate Turnover under GST?

Aggregate Turnover means the total value of sales made by a business registered under the same PAN. Sales include the aggregate of the following:
1. Taxable sales
2. Exempt sales
3. Exports
Aggregate turnover excludes:
1. Value of tax on sales
2. Value of purchases on which tax is paid under RCM (reverse charge mechanism)

Can I have more than one GST registration on a single PAN?

Yes. It is possible in the case of multiple business verticals within the same state. A person having different categories of business may obtain multiple registrations with the same PAN within a single State. Further, these will be treated as separate taxable persons for all purposes of GST.

What is the fee for a GST Registration?

There is no fee charged by the government for GST registration. However, a professional fee may be charged if services of a GST Practitioner or a Chartered Accountant are used.

Calculate Aggregate Turnover under GST

Aggregate Turnover means the total value of sales of a GST registered business having the same PAN and calculated on an all India basis. Under GST, you can calculate the aggregate turnover for the following purpose:

Aggregate Turnover – Determine eligibility for GST Registration

If the Aggregate Turnover of the business exceeds the threshold limit as prescribed in the GST Act, the business must compulsorily register under GST. Following the revised threshold limit for GST Registration:

StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh10 lacs20 lacs20 lacs
Himachal Pradesh10 lacs20 lacs40 lacs
Jammu and Kashmir20 lacs20 lacs40 lacs
Puducherry, Telangana20 lacs20 lacs20 lacs
Other States20 lacs20 lacs40 lacs
StateUp to 31/03/201901/02/2019 to 31/03/2019From 01/04/2019
Manipur, Mizoram, Nagaland, Tripura10 lacs10 lacs10 lacs
Uttarakhand, Assam, Meghalaya, Sikkim, Arunachal Pradesh, Himachal Pradesh10 lacs20 lacs20 lacs
Other States20 lacs20 lacs20 lacs
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Aggregate Turnover – Determine eligibility to avail benefit of Composition Scheme

If the aggregate turnover exceeds Rs.40 lakhs for goods (Rs.20 lakhs for special category states) but is up to Rs. 1.5 Cr (Rs.75 lacs for special category states), the business can register under the composition scheme to reduce compliances and pay tax at a specified rate of turnover. For services, if the aggregate turnover exceeds Rs.20 lakhs for services (Rs.10 lakhs for special category states) but is up to Rs. 50 lacs, the business can register under the composition scheme on GST Portal. In case of a composition scheme, the outward tax payable is calculated on the basis of turnover in the state.

How to Calculate Aggregate Turnover under GST?

Aggregate Turnover of a business is the total value of:

  1. Taxable supplies
  2. Exempt supplies
  3. Export of goods or services
  4. Inter-state supplies

To calculate aggregate turnover, the following points must be considered:

  1. It excludes the value of inward supplies on which tax is payable by a person on a reverse charge basis.
  2. It excludes the taxes – CGST, SGST, UTGST, IGST and Compensation Cess
  3. Also, it excludes the value of goods or services not covered under the GST Act
  4. It is the total value of turnover of all the business on the same PAN
  5. It is the total value of turnover of the business on all India basis

Example 1

Mr.X living in Mumbai is a trader of goods. On the same PAN, he has a branch in Delhi. The details of his sales (excluding GST) during the FY 19-20 are:

  • Taxable goods from Mumbai = Rs.15,00,000
  • Exempt goods from Delhi = Rs.10,00,000
  • Exports from Mumbai = Rs.5,00,000
  • Non-GST Goods from Delhi = Rs.1,00,000
  • Total GST on above sales is Rs.1,50,000

Determine whether he is liable to register under GST.

Solution

Calculation of  aggregate turnover:

Turnover of both Mumbai head office and Delhi branch should be combined since the business is on the same PAN

Taxable goods Rs. 15,00,000
Exempt goods Rs. 10,00,000
Export of goods Rs.   5,00,000
Total Turnover Rs. 30,00,000

Since the aggregate turnover is less than Rs.40 lacs for business situated in Maharashtra, registration under GST is not required.

Example 2:

If in Example 1, the head office was situated in Assam. Determine whether he is liable to register under GST.

Solution

Since the business is situated in a special category state i.e. Assam and the aggregate turnover exceeds Rs.20 lacs, he is liable to register under GST.

FAQs

What is the purpose of calculating aggregate turnover in GST?

Under GST, the aggregate turnover is required to be calculated for the following purpose:
1. Determine eligibility for GST Registration
2. Determine eligibility to avail benefit of Composition Scheme

What does aggregate turnover of a business in GST consists of?

Aggregate Turnover of a business is the total value of:
1. Taxable Sales
2. Exempt Sales
3. Export of goods or services
4. Inter-State Sales

The aggregate turnover of business in Gujarat is Rs. 30 lacs. The business makes an inter-state supply of goods to Maharashtra. Is GST Registration mandatory?

The aggregate turnover does not cross the threshold limit of Rs. 40 lacs for GST Registration in Gujarat. However, a business that makes the inter-state supply of goods must take compulsory registration under GST. Therefore, the taxpayer must apply for GST Registration since he/she is engaged in inter-state sales.

Should I file my GST Return monthly or quarterly?

Every business registered under GST must file all its GST Returns regularly within the due dates to avoid penalties and late fees. Periodicity of filing GST return will be deemed to be monthly for all taxpayers unless quarterly filing of the return is opted for

Taxpayer registered under Regular Scheme

For business registered under the regular scheme, the type of GST Return and the frequency of filing it depends on the turnover of the business.

1. Returns under Monthly Scheme

If the aggregate turnover of the business in the preceding financial year exceeded Rs.1.5 Crore OR the aggregate turnover during the current financial year is expected to exceed Rs.1.5 Crore, following returns are to be filed:

GST Return Frequency Description Due Date
GSTR-3B Monthly Summary Return with details of outward supplies, inward supplies and payment of tax 20th of next month
GSTR-1 Monthly Sales Return with details of outward supplies for businesses with aggregate turnover of more than Rs.1.5 Crore 11th of next month

2. Returns under Quarterly Scheme

If the aggregate turnover of the business in the preceding financial year was up to Rs.1.5 Crore OR the aggregate turnover during the current financial year is expected to be up to Rs.1.5 Crore, following returns are to be filed:

Form Frequency Description Due Date
GSTR-3B Monthly Summary Return with details of outward supplies, inward supplies and payment of tax 20th of next month
GSTR-1 Quarterly Sales Return with details of outward supplies for business with aggregate turnover of more than Rs.1.5 Crore last date of next month from end of the quarter

Taxpayer registered under Composition Scheme

A business can register under the Composition Scheme if the aggregate turnover is up to Rs.1 Crore. Tax is to be paid at a specified rate based on the nature of the business.

Taxpayers who have applied for registration under Composition Scheme should file the following GST Return:

Form Frequency Description Due Date
GSTR-4 Quarterly Return with details of outward supplies and payment of tax at a fixed rate of turnover of the return period 18th of next month from end of the quarter

FAQs

Who should file GSTR1 monthly?

Every registered dealer is required to file GSTR-1 every month. The return contains details of all outward supplies made during the month. However, certain taxpayers having annual turnover upto Rs 1.5 crores can opt to file the GSTR-1 once in every quarter.

Can the taxpayer change the period (whether monthly or quarterly) of filing his return?

The taxpayer will have the option to change the period (from quarterly to monthly and vice versa) of filing his returns only once – at the time of filing his first return for that financial year.

How do I convert from monthly to Quarterly?

For change Return filing Status from Monthly to Quarterly, follow the steps
1. Visit GST Portal
2. Enter login details, then click login.
3. Click file returns.
4. Select month, then click search.
5. Select yes if you are change monthly to Quarterly, then click search.

Composition Scheme v/s Regular Scheme under GST

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. 

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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  

FAQs

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%)

I am an ice cream manufacturer with sales in one state only. Can I register under Composition Scheme?

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

Can I register under Regular Scheme now and later opt for Composition Scheme under GST?

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.

What are disadvantages of registering under Composition Scheme in GST?

Registration under the composition scheme in GST has its own set of benefits and drawbacks. The taxpayer should analyse the advantages and disadvantages to opt for GST Composition Scheme on GST Portal.

Disadvantages of GST Composition Scheme

  • No Input Tax Credit
    Input Tax Credit cannot be availed by dealers registered under the composition scheme. Thus, GST paid on purchase cannot be used for payment of GST on sale of goods or services.
  • Cannot collect tax on sales
    Business registered under the Composition Scheme cannot collect GST from customers on the sale of goods or services. As a result, it should issue a Bill of Supply and cannot charge GST.
  • No E-Commerce Sales
    A composition business cannot sell goods or services through an e-commerce platform. Therefore, if a seller wants to sell products online on an e-commerce portal, must compulsorily register under the regular scheme. Thus, an E-Commerce Seller cannot register under Composition Scheme.
  • No Inter-State Sales
    A composite dealer cannot sell goods outside its state of registration. It also cannot carry out the export of goods. Thus, there is a limited territory for business, and expansion is difficult. However, a composite dealer can sell services outside its state of registration.
  • Cannot sell exempt goods
    Business registered under composition scheme can supply taxable goods and restaurant services. Thus, they cannot sell non-taxable goods and services other than restaurant services.
  • Heavy Penalty
    If a dealer has obtained registration under Composition Scheme without being eligible for the same, there are strict penalty provisions. The dealer is liable to pay the amount of differential tax and a penalty of up to 100% of tax liability. Thus, a business should apply for registration under the composition scheme only if it fulfills all the conditions.

FAQs

Can a person who has opted to pay tax under the composition scheme 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 cannot take credit on his input supplies. When he switches over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.

Can a registered person, who purchases goods from a taxable person paying tax under the composition scheme, avail credit of tax paid on purchases made from the composition dealer? 

No, as the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme cannot avail input tax credit.

Can a person paying tax under the composition scheme issue a tax invoice under GST? 

No. He can issue a bill of supply in lieu of tax invoice. As he cannot issue a tax invoice, he cannot charge and collect tax from his supplies.  

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 though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for the determination of tax and penalty.