After applicability of CGST Act, 2018 with an object of transparency in transactions creates an unnecessary burden of compliances on small businessmen who are earning a while and may get frustrated in following these high levels of compliances. So, for those taxpayers a simple and easy scheme is being introduced in the Act that is the Composition Scheme under which a taxpayer can get rid of all the compliances after paying a fixed rate of tax on its Turnover. But there are a lot of confusions regarding the scheme out of which some are discussed below:
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Who can opt for the Composition Scheme?
Any taxpayer whose turnover is less than Rs. 1.5 Cr. can opt for this scheme but in case of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura & Himachal Pradesh the above threshold limit is of Rs. 75 Lakhs.
And in the 32nd meeting of council the threshold limit of opting Composition scheme for service providers is set up to Rs. 50 Lakhs.
NOTE: Threshold limit here includes turnover of all the businesses registered under the same PAN.
The below list shows some of the taxpayers who are not eligible to take the benefit of the above scheme:
- Supplier of Ice Cream, Pan Masala, or Tobacco;
- A person making inter-state supplies;
- Casual taxpayer or non-resident taxable person;
- Businesses which supply goods through an e-commerce operator.
- Supplier of non-taxable goods.
- Supplier of service other than restaurant owners (serving foods and non-alcoholic beverages).
GST Rates for a Composition Dealer
| Type of business | CGST | SGST | TOTAL |
| Manufacturer and Traders (Goods) | 0.5% | 0.5% | 1% |
| Restaurants not serving alcohol | 2.5% | 2.5% | 5% |
| Other service providers | 3% | 3% | 6% |
Procedure for shifting from normal scheme to Composition Scheme
The taxpayers can opt for the scheme at the beginning of the financial year, so Form GST CMP-02 is required to be filled before the beginning of the Financial Year in which the taxpayer wants to opt the scheme.
The registered taxpayer shall be required to pay an amount equal to the input tax credit related to inputs held in stock, and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of exercise of option
NOTE: The taxpayer opting for the scheme is also required to mention “composition taxable person, not eligible to collect tax on supplies” on the top of every bill issued by him and “composition taxable person” on every sign board or notice displayed at principal place of business and additional place of business.
Can any taxpayer withdraw from the scheme voluntarily
Yes, anyone who opted for the scheme can withdraw from the scheme as and when it requires by filling the below mentioned forms:
- Duly signed application in Form GST CMP–04.
- Shall furnish electronically a statement in Form GST ITC – 01 having details of the stock of inputs as raw material, in semi-finished or finished goods held by the taxpayer in stocks on the date of opting out of the composition scheme, within a period of 30 days of opting out.
Return filing under Composition Scheme
- Form GST CMP-08 by 18th of the month succeeding the quarter.
- Annual return in Form GSTR-4 is required to be filled by 30th April of the succeeding year.
- Form GSTR-9A is also an annual return which is used to reflect any additional tax liability which is not disclosed under Form GSTR-4.
Note: In case of late filing of annual return there is a penalty of Rs. 100 per day to the maximum limit of 0.25% of its Turnover.
