What is Composition Scheme under GST?
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 of Rs.40 lacs for goods (Rs.20 lacs for special category states) or
Rs.20 lacs for goods (Rs.10 lacs for special category states). Such business can avail the benefit of Composition Scheme u/s 10 of the GST Act.
Features of the 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. [Read More: How to calculate aggregate turnover under GST?]
- A composite dealer cannot collect GST from its customers on the sale of goods or services.
- A composite dealer cannot claim an input tax credit of the GST paid on the purchase of goods or services. [Read More: What is Input Tax Credit (ITC) under GST?]
- Quarterly return i.e. GSTR-4 should be filed on or before 18th of the month from the end of a quarter. [Read More: What is GSTR-4 under GST?]
- 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
- Business should mention ‘composition taxable person’ on the bill of supply issued to its customers [Read More: What is a Bill of Supply under GST?]
- Any business that opts for composition scheme without meeting the prescribed conditions would be subject to a penalty by the GST department.
1. How do I opt for Composition Levy if I am already registered as a regular taxpayer?
Following are the steps on the GST portal to opt for the Composition Levy:
- Log in to the Taxpayers’ Interface
- Go to Services > Registration > Application to Opt for Composition Levy
- Fill the form as per the form specification rules and submit
2. 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.
3. Can I opt for Composition Levy, if I have dealt in services?
Yes. Businesses can now opt for Composition Levy, even if they have dealt in services, from FY 2019-20 onwards.
4. How can I withdraw from the Composition Levy on the GST Portal?
Following are the steps to withdraw from Composition Levy scheme:
Services > Registration > Application for Withdrawal from Composition Levy