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.