FAQs on Composition Scheme

Composition scheme: Any taxable person whose aggregate turnover in the preceding financial year is less than Rs. 1.5 Crores from April 1, 2019 (less than Rs. 75 lakhs for North Eastern States) can opt for a simplified GST composition scheme. In composition scheme under GST, tax will be payable at a concessional rate on the turnover in a state without the benefit of Input Tax credit.

Here are some of the common questions related to Composition Scheme in Goods and service Tax regime-

1. Can a Composition Dealer purchase inter-state?

• Yes, this is possible. There is no restriction on procuring goods from inter-state suppliers by persons opting for the composition scheme
  

2. What is the specified rate of composition levy?

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3. Is composition dealer liable to pay Reverse charge in addition to fixed percentage of normal GST that he has to pay ?

• If reverse charge is applicable on a particular supply then the composition dealer has to pay GST under reverse charge as a recipient of supply at normal GST rates as applicable.

4. Should a Composition Dealer maintain detailed records?

• No, a dealer registered under composition scheme is not required to maintain detailed records as required by a normal taxpayer.

5. Can Composition Dealers avail Input Tax Credit?

• No , Composition dealer cannot avail Input Tax Credit. Therefore, a taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies.

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6. Can a Composition Dealer issue Tax Invoices?

• A Composition Dealer has to issue Bill of Supply. They cannot issue a tax invoice. This is because the tax has to be paid by the dealer out of pocket. A Composition Dealer is not allowed to recover the GST from the customers.

7. What are the returns to be filed by a Composition Dealer?

• GST CMP-08 Form – Quarterly statement for paying composition tax.
• GSTR-4 on an annual basis, decided in 32^nd GST Council Meeting and an annual return in FORM GSTR-9A.

8. Can a Composition Dealer collect tax from customers?

• No, a Composition Dealer cannot collect composition tax from the buyer.

9. Can a dealer involved in interstate supplies opt for Composition Scheme?

• Composition Scheme is available only for dealers doing intra-state supplies. If a dealer supplies inter-State supplies, then they have to opt out of the scheme.

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10. What is the treatment for input credit on changing from normal scheme to Composition Scheme?

• When switching from normal scheme to composition scheme, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day immediately preceding the date of such switchover. The balance of input tax credit after payment of such amount, if any lying in the credit ledger will lapse.

11. Can I opt for Composition Scheme in one year and opt out in next year?

• Yes, this is possible. You can opt to switch between the Composition Scheme and the normal scheme based on your turnover. However, you will have to keep in mind that this will affect the way you issue invoices and file your returns. Submit the declaration of change on the GST Portal.

12. Can the option to pay tax under composition levy be exercised at any time of the year?

• Before the beginning of every financial year, a registered taxpayer will give declaration on the GST Portal in FORM GST CMP-02. 

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13. When will a person opting for composition levy pay tax?

• A person opting for composition levy will pay tax on quarterly basis before 18^th of the month succeeding the quarter during which the supplies were made. (Note- subject to change by the government notification.)

14. In case the option to pay tax under composition levy is denied by the proper officer, can the person avail ITC on stock after denial?

• ITC can be availed by filing, a statement in FORM GST ITC-01 by him on the date on which the option is denied as per order in FORM GST CMP07, within a period of thirty days from the order. GST ITC-01 contains details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock.

15. Can the service provider opt for Composition Scheme?

• Yes, Composition scheme for services providers is available. Threshold limit of the composition scheme for service providers is Rs 50 Lakh taxable at the rate of 6%, available from April 1,2019.

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