What is the tax rate under Composition Scheme?

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By Sakshi Shah on February 18, 2019

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 are the prescribed rates for different categories of registered suppliers under Composition Scheme:

Nature of BusinessItem TypeTotalCGSTSGST
TraderGoods1%0.5%0.5%
ManufacturerGoods2%1%1%
Restaurants not serving alcoholServices5%2.5%2.5%
Other Services (effective from 1st April 2019)Services6%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 is calculated on the aggregate turnover in a state or union territory.
How to calculate aggregate turnover under GST?
  • A composite dealer must pay CGST and SGST at the prescribed rate on his turnover. He shall not pay IGST.

Example

Mr.A is a trader registered under Composition Scheme. Sales Turnover from 01.04.2018 to 30.06.2018 is Rs.10,00,000. He is liable to pay CGST = Rs.5,000 (Rs.10,00,000*0.5%) and 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. It is must be paid while filing GSTR-4 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.
What is a Bill of Supply under GST?