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Composition Scheme under GST?

What is composition scheme under GST?

A taxpayer opting for composition scheme can pay GST at his outward supply at the fixed rate of GST as prescribed under Rule 7 of CGST Rules (see below).

 

What is the turnover limit for compisition levy under GST?

Earlier maximum annual turnover for composition scheme was Rs. 50 Lakh only. However this limit was later increased to Rs. 1.5 crores vide Notification No.14/2019 - Central Tax dated 07.03.2019 w.e.f. 01.04.2019. For some states, this limit is Rs.75 Lakhs only. 
 
Turnover has to be calculated PAN wise (not GSTIN wise) for the purpose of composition scheme.
 

Can a business having one PAN but two or more GSTINs opt for composition scheme for one GSTIN only? 

No. As per proviso to Section 10(2) of CGST Act, where more than one registered persons are having the same PAN, the registered person shall not be eligible to opt for the composition scheme unless all such registered persons opt to pay tax under composition scheme. That means taxpayer can not pick and choose GSTIN for composition scheme. He has to opt the scheme for all GSTIN having same PAN.  

 

Can composite taxpayer provide services also?

As per second proviso to Section 10(1) of CGST Act, a person who opts to pay tax under section 10(1) may supply services of value not exceeding 10% of turnover in the preceding financial year or Rs. 5 Lakh, whichever is higher.

Explanation.––For the purposes of second proviso, the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account for determining the value of turnover.

 

Can composite taxpayer make inter-state supply?

No. As per section 10(2) of CGST Act, composite taxpayer cannot make any inter-state outward supply.

However there is no such restriction for inter-state inward supply.   

 

Can composite taxpayer collect GST from customers?

No. As per section 10(4) of CGST Act, a composite taxpayer shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

 

Can composite taxpayer claim ITC?

No. As per section 10(4) of CGST Act, a composite taxpayer shall not be entitled to any credit of input tax.

 

Can composite taxpayer issue tax invoice?

No, a composite taxpayer can not issue tax invoice. Composite taxpayer can only issue "Bill of Supply" and that too without GST. 

 

Who can opt for Composition Scheme?

Manufacturer, trader of goods and Restaurants (except restaurants serving alcohol) can opt for composition scheme under section 10 of CGST Act.

 

What is Form GSTR-4?

As per Rule 62(1) of CGST Rules, every composite taxpayer is required to furnish a return for every financial year in FORM GSTR-4.

 

Due date for FORM GSTR-4?

As per Rule 62(1) of CGST Rules, the standard due date to file FORM GSTR-4 is 30th day of April following the end of relevant financial year. However the due date for Financial Year 2018-19 has been extended by CBIC upto 31st August 2020 vide Notification No.59/2020.

 

What is FORM CMP-08?

In addition to annual return in FORM GSTR-4, Composite taxpayer is also required to furnish a statement every quarter containing the details of payment of self-assessed tax in FORM GST CMP-08, till the 18th day of the month succeeding such quarter.

 

Due date for FORM CMP-08?

As per Rule 62(1) of CGST Rules, standard due date to file FORM GST CMP-08 is 18th day of the month succeeding the relevant quarter.

 

Can composite taxpayer discharge his outward liability from credit ledger?

As per Rule 62(2) of CGST Rules, every registered person furnishing the statement under rule 62(1) (i.e. GSTR-4 and GST CMP-08) shall discharge his liability towards tax or interest payable under the Act by debiting the electronic cash ledger. 

It is to be noted that composite taxpayer can discharge his tax and interest liability from cash ledger only. He is not allowed to discharge the same from credit ledger becuase composite taxpayers cannot avail any ITC.

 

Rate of Tax applicable for Composite taxpayers?

As per Rule 7 of CGST Rules, below are the tax rates applicable for composite taxpayers.

Sl. No. Section under which composition levy is opted Category of registered persons Rate of tax
(1) (1A) (2) (3)
1. Section 10(1) & 10(2) of CGST Act Manufacturers and Traders - (For Goods) 1% (0.5% CGST + 0.5% SGST)
2. Section 10(1) & 10(2) of CGST Act Restaurant (except restaurants serving alchohal) 5% (2.5% CGST + 2.5% SGST)
4. Section 10(2A) of CGST Act Composite taxpayers providing services as per second proviso to section 10(1) of CGST Act - (For Services) 6% (3.0% CGST + 3.0% SGST)

 

Whether composite taxpayer is liable to pay reverse charge?

Yes, like a regular taxpayer, composite taxpayer is also liable to pay reverse charge at the applicable rates (wherever applicable). However compoosite taxpayer cannot avail ITC of the reverse charge paid by him.


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Published by

TaxReply

on Aug 14, 2020

Comments


Well drafted. Good information
By: Vinod | Dt: Aug 14, 2020
Tax rate for dealers under composition scheme : for Manufacturers and others excluding traders is 1% of Turnover but for traders the rate is 1% of Taxable Turnover.It should be mentioned.
By: Sumit Kumar Chakraborty | Dt: Aug 15, 2020
Good morning
By: Vijay Kumar Jaiswal | Dt: Aug 17, 2020


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