Composition scheme in Goods and Service Tax (GST) Regime is an easy and simple scheme introduced by the government for the small taxpayers so that they can get rid of complex formalities and pay tax at a fixed rate on turnover. Before opting this scheme one must be aware of following points:
Who is eligible for GST composition scheme?
Following persons can opt for composition scheme:
- Person who does Intra-state outward supplies of goods
- Person who who does not sale notified goods
- A taxpayer opting for composition scheme is not required to issue tax invoice but need to issue Bill of Supply, on which tax is not charged. Also, he shall mention “Composition Taxable Person, not eligible to collect tax” at the top of the Bill of Supply issued by him.
Who cannot opt for composition scheme?
Following persons cannot opt for this scheme under GST:
- Non- GST goods/services supplier (e.g. Petroleum Products),
- E-Commerce operators,
- Inter-State supplier of goods/services,
- Casual Taxpayer,
- Non-Resident Foreign Taxpayers,
- Input service Distributer (ISD),
- TDS Deductor/Tax Collector,
- Manufacturer of notified goods like
- Ice cream & other edible ice
- Tobacco and manufactured tobacco substitutes
- Pan Masala
- Aerated water.
GST composition scheme turnover limit for goods
- Supplier of goods whose aggregate turnover is below Rs. 1.5 crore in the previous financial year.
- Supplier of goods whose aggregate turnover is below Rs. 75 lakh in the previous financial year having place of business in the following states:
- Arunachal Pradesh,
GST composition scheme turnover limit for services
The Taxpayers who supply services having aggregate turnover below Rs. 50 lakh in previous financial year.
Composition scheme under GST rate
|Type of business||CGST||SGST||Total|
|Manufacturers and traders (goods)||0.5%||0.5%||1.0%|
|Restaurants not serving alcohol||2.5%||2.5%||5.0%|
|Other service providers||3.0%||3.0%||6.0%|
GST Return for composition scheme taxpayers
The taxpayers registered under this scheme taxpayers need to mandatorily file following GST Returns:
- GST CMP-08 Form – Quarterly statement for paying composition tax.
- GSTR-4 on an annual basis, decided in 32nd GST Council Meeting and an annual return in FORM GSTR-9A.
Procedure to opt the composition scheme for FY 2023-24
The option for availing composition scheme is now available at GST Portal for the year 2023-24. Taxpayers who are already registered under this scheme are not required to opt in again for current year. The eligible taxpayers, who wish to avail the composition scheme may opt in for composition before 31st March 2023.
To opt in for the scheme, please navigate to:
GST Login > Services > Registration > Application to opt for composition levy.
Pros and cons of Composition scheme under GST
Following are the merits of opting for the GST composition levy:
- Businesses enjoy higher liquidity since a lower amount of GST has to be paid to the government
- Businesses enjoy lesser compliance (maintaining records, filing returns, issuance of invoices, and so on) under this scheme. This also provides dealers with ample time to focus on core business activities
- Businesses can enjoy a much lesser tax liability when they opt for this scheme. The biggest advantage of this is for startups and smaller businesses that often see cash crunches on a regular basis. Most startups that do not see a turnover of over Rs 1.5 crore are less likely to have extra cash that can go into taxes. With the composition scheme, the government has ensured that more startups can flourish in a market that has become friendlier towards their plight
As is the case with most things, one must also consider the disadvantages of any plan before praising it wholeheartedly. Some of the demerits of the composition levy are:
- Businesses registered under this scheme have a limited territory to perform their operations since inter-state supplied are not allowed
- Businesses cannot supply exempted goods. For instance, a coconut trader cannot avail this scheme because coconuts, fresh or dried, whether or not shelled or peeled fall under exempted goods
- Businesses cannot claim the input tax credit (taxes paid on purchases) if they opt for this scheme