The GST composition scheme is an easy scheme that’s designed to simplify the GST process for taxpayers. Certain taxpayers (covered later) can opt for the composition scheme and eliminate unnecessary GST formalities. Moreover, this scheme also enables taxpayers to pay GST at a fixed rate of turnover.

Who can opt for the GST composition scheme?

Any taxpayer whose turnover is below INR 1.5 CR can opt for the composition scheme. The limit has been amended to INR 75 lakhs in north-eastern states and Himachal Pradesh.

As for the restrictions on applying for the composition scheme, the following category of individuals will not be able to opt for the GST composition scheme:

1. Manufacturers of ice cream, pan masala, or tobacco.
2. Individuals making inter-state supplies.
3. A casual taxable person
4. A Non-Resident taxable person.
5. Organizations that supply goods through an e-commerce intermediary.

How can taxpayers opt for the composition scheme?

To register under the composition scheme, a GST taxpayer has to file GST CMP-02 on common GST portal. This is an online process, to be completed on the GST portal.

If a dealer wants to opt out of the composition scheme, due intimation should be given at the beginning of the FY.

Returns and payments under the composition scheme

A dealer under the composition scheme is required to pay tax in a quarterly statement CMP-08 by the 18^th of the month after the end of the quarter. In addition, a return needs to be filed in form GSTR-4 annually, by the 30^th of April of the next FY.

The Taxpayer can not collect tax from the recipient under Composition scheme. Hence, tax is required to paid out of own pocket under Composition scheme.

What are the advantages of the composition scheme?

1. Lesser compliance overheads, including filing returns, maintaining books of record, and issuance of invoices.
2. Limited tax liability.
3. Advantageous for small traders as they don’t have to worry about multiple tax rates

GST rates for composition dealers

Prerequisites for availing the composition scheme?

Turnover criteria (1.5 CR) is just one of the prerequisites of becoming eligible for the composition scheme. The following conditions need to be met by dealers in order for them to avail the composition scheme.

1. Composition taxpayer is not eligible for Input Tax Credit (ITC).
2. The dealer cannot be engaged in a supply of non-GST-taxable goods such as alcohol.
3. The taxpayer under the composition scheme has to pay tax at normal rates for transactions under RCM.
4. If a dealer has established various businesses in different sectors under the same PAN, all the businesses have to be registered under the composition scheme. Otherwise, the dealer has to opt out of the scheme.
5. The taxpayer has to explicitly mention ‘composition taxable person’ on notices and sign boards displayed prominently at their business place. Similarly, these words have to appear on every bill of supply.
6. As per the CGST (Amendment) Act, 2018, a manufacturer or trader can also supply services to an extent of 10% of turnover, or INR 5 lakhs, whichever is higher.

Latest updates

5th July 2022

(a) The due date of GSTR-4 for FY 2021-22 is further extended by a late fee waiver up to 28th July 2022 vide Notification 12/2022 dated 5th July 2022.

(b) The due date of CMP-08 for April-June 2022 is extended up to 31st July 2022 vide Notification 12/2022 dated 5th July 2022.

26th May 2022

As per the CGST Notification no.7/2022 dated 26th May 2022, the late fee has been waived for the delay in filing GSTR-4 for FY 2021-22, if it is filed between 1st May and 30th June 2022.

24th February 2022

Composition taxable persons and those interested to opt into the scheme for FY 2022-23 must submit a declaration on the GST portal in Form CMP-02 by 31st March 2022.

If you are a taxable supplier looking for assistance on the composition scheme, reach out to us.