What is the tax rate under Composition Scheme?

Business registered under Composition Scheme cannot collect GST on sales made to its customers. It cannot claim the input tax credit of GST paid on purchases of goods and services. A composite dealer needs to pay GST to the government at a prescribed rate determined on the nature of its business. Here is the prescribed tax rate for different categories of registered suppliers under Composition Scheme:

Nature of Business Item Type Total CGST SGST
Trader Goods 1% 0.5% 0.5%
Manufacturer Goods 2% 1% 1%
Restaurants not serving alcohol Services 5% 2.5% 2.5%
Other Services (effective from 1st April 2019) Services 6% 3% 3%
  • A composite dealer should pay two kinds of taxes:
    • Tax on Sales – to be paid on sales at prescribed rates as per the above table
    • Tax on Purchase – to be paid on purchases falling under Reverse Charge Mechanism (RCM)
  • The prescribed tax rate under composition scheme is calculated on the aggregate turnover in a state or union territory.
  • A composite dealer must pay CGST and SGST at the prescribed rate on his turnover. He shall not pay IGST.

Example – Tax Rate Composition Scheme

Mr.A is a trader registered under Composition Scheme.
Sales Turnover from 01.04.2018 to 30.06.2018 is Rs.10,00,000.
Tax Liability is:
Pay CGST = Rs.5,000 (Rs.10,00,000*0.5%)
Pay SGST = Rs.5,000 (Rs.10,00,000*0.5%)

  • TXOS – TXOS i.e. Tax on Outward Supplies means the GST on sales of goods and services. Pay tax while filing CMP-08 of the relevant quarter
  • Tax can be paid by creating a challan on the GST Portal
  • A composite dealer cannot issue Tax Invoice to its customers. He must issue a Bill of Supply and cannot charge GST.

FAQs

Should a Composition Taxpayer pay IGST, CGST or SGST?

The taxpayer registered under Composition Scheme cannot collect GST from their customers. However, they must pay GST on sales at specified rates. Composite Dealer should pay CGST and SGST on sales on a quarterly basis. Eg: Tax Rate for a manufacturer of goods is 2%. Thus, manufacturer of taxable goods registered under composition scheme should pay CGST at 1% and SGST at 1% on sales turnover. Composite Dealer is not required to pay IGST on sales.

How should a Composite Dealer pay tax on GST Portal?

The taxpayer registered under Composition Scheme should pay tax while filing GST CMP-08 on the GST Portal. The taxpayer should enter data of sales and purchases in CMP-08 and pay challan to pay tax at the prescribed rate on sales.

What are the returns to be filed by a Composition taxpayer?

Composition taxpayer needs to pay tax and furnish a statement, every quarter in FORM GST CMP-08. Further, he/she is also required to furnish a return for every financial year in FORM GSTR-4.

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.