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Composition Scheme under GST

The Composition Scheme under GST is voluntary and optional scheme. The small taxpayers are eligible to take benefits under the Scheme. The Scheme, basically, ease ups the return filing and tax payment requirement under GST. The Scheme is briefly explained in the present article.

Person eligible under Composition Scheme [Notification no. 14/2019- Central Tax dated 7^th March 2019]-

Every registered person whose aggregate turnover doesn’t exceed INR 150 Lakhs in the preceding financial year will be eligible to avail the benefit under the Composition Scheme. However, he also needs to satisfy all the conditions stated in the below paras.

Notably, for the person registered in any of the following States, the aggregate turnover should not exceed INR 75 Lakhs in the preceding financial year-

• Arunachal Pradesh;
• Meghalaya;
• Manipur;
• Mizoram;
• Tripura;
• Nagaland;
• Uttarakhand;
• Sikkim; and
• Himachal Pradesh.

It is important to here note that a person having a single Permanent Account Number (i.e., PAN) and registered in more than one States/ Union territory under GST. Then, all such registered person (having the same PAN) needs to opt under Composition Scheme. Meaning thereby that the registered person cannot choose to opt for the Composition Scheme in one State and not in another State.

Conditions for availing under Composition Scheme [Section 10(2) of CGST Act, 2017]-

The registered person willing to opt under the Composition Scheme needs to satisfy all of the below conditions-

Condition 1 – He should be engaged in the supply of services only to the extent of higher of the following amounts-

• Value not above 10% of the turnover in State/ Union territory in the preceding financial year; or
• INR 5 Lakhs.

Condition 2 – He should not be engaged in supplying goods/ services which are not taxable under GST.

Condition 3 – He should not be engaged in an Inter-State supply of goods/ services.

Condition 4 – He should not be a casual taxable person or a non-resident taxable person.

Condition 5 – He should not be engaged in supplying goods/ services through an e-commerce operator collecting TCS under section 52.

Condition 6 – He should not be engaged in manufacturing of any of the following goods [refer notification no. 14/2019-Central Tax dated 7^th March 2019]-

Sr. No.	Heading/ sub-heading	Description of items
1	2105 00 00	Ice-cream and other edible ice (whether or not containing cocoa)
2	2106 90 20	Pan masala
3	24	All goods (Tobacco and manufactured tobacco substitutes)

Opting under Composition Scheme-

In order to opt under the Scheme, different procedures are to be followed under different situations, the same are tabulated hereunder-

Sr. No.	Different Situations	Procedure to be followed for opting under composition scheme
1	Fresh registration under GST and directly wants to opt for composition scheme	Select the option in Part B of application Form GST REG-1 [Rule 3(2) of CGST Rules 2017].
2	Switching from Normal taxable person to Composition scheme	File intimation in Form GST CMP-02 prior to commencement of the relevant Financial Year for which the option to pay tax under Composition Scheme is to be exercised. Statement in Form GST ITC-03 is to be submitted within a period of 60 days from the commencement of the relevant Financial Year [Rule 3(3) of CGST Rules 2017].

GST rates applicable under Composition Scheme [Section 10(1) of CGST Act read with Rule 7 of CGST Rules]-

The GST rates for composition scheme dealer is as under-

Sr. No.	Category of composition dealer	Rate of GST
1	Tax payable by the manufacturer	1% (0.5% CGST + 0.5% SGST)
2	Tax on the restaurant service	5% (2.5% CGST + 2.5% SGST)
3	Tax payable by the traders	1% (0.5% CGST + 0.5% SGST)

Filing of returns under Composition Scheme [Rule 62 of CGST Rules]-

The Composition dealer is required to furnish the following two types of returns-

Forms	Description	Due date of filing of return
Form GST CMP-08 [Rule 62(1)(i) of CGST Rules]	Statement for payment of self-assessed tax	Quarterly Return (Within 18 days of the month succeeding the quarter)
Form GSTR-4 [Rule 62(1)(ii) of CGST Rules]	Return for the financial year of the registered person who has opted for composition levy	Annual Return (Within 30th April of the next Financial Year)

Guidelines for the Composition Scheme dealer [Rule 5 of CGST Rules]-

The registered person opting under the Composition Scheme needs to follow the below rules-

1. The person opting under the Scheme needs to mention the following words at the top of the bill of supply issued by him-

“Composition taxable person, not eligible to collect tax (GST) on supplies”

2. Such persons need to mention “Composition taxable person” on every notice/ signboard which is displayed prominently at the place of business.
3. Notably, the opted person has to pay GST tax at normal rates for transactions covered/ taxable under the Reverse Charge Mechanism.
4. The person opting under the Scheme will not be eligible to avail Input Tax Credit.

Important points-

1. Once opted under Composition Scheme, the registered person is not required to file a fresh intimation every year.
2. The option of Composition Scheme exercised once will remain valid till the registered person satisfies all the prescribed conditions [Rule 6(1) of CGST Rules].
3. An application in Form GST CMP-04 needs to be filed in case the registered person intends to withdraw from the Composition Scheme [Rule 6(3) of CGST Rules].
4. The flow of action, in case the proper officer believes that the registered person is either not eligible under Composition Scheme or has contravened provisions thereon, is summarized hereunder-
   1. The proper officer will issue a notice in Form GST CMP-05.
   2. The registered person will reply within a period of 15 days, to the said notice in Form GST CMP-06.
   3. Based on the reply, the proper officer will issue an order in Form GST CMP-07 within a period of 30 days from the date of receipt of the reply.

My Account and Validity
Reg. No. : 12193
Reg. Date : Jan 1, 2020
Name : m-murali

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