Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.0 crore*.
*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.
Let us understand this scheme in detail-
A taxpayer whose turnover is below Rs 1.0 crore* can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.
As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019. Further, GST Council in its 32nd meeting proposed an increase to this limit for service providers on 10th Jan 2019*.
Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.
*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.
As per 32nd GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax Scheme, and the Government has set the threshold turnover for service providers at Rs. 50 lakhs to be eligible for this scheme.
The following people cannot opt for the scheme-
The following conditions must be satisfied in order to opt for composition scheme:
To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal.
This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme.
Here is a step by step Guide to File CMP-02 on GST Portal.
A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket.
Hence, the dealer has to issue a Bill of Supply.
The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.
Following chart explains the rate of tax on turnover applicable for composition dealers :
GST Payment has to be made out of pocket for the supplies made.
The GST payment to be made by a composition dealer comprises of the following:
*Only on the specified categories of goods and services and well as the notified class of registered persons with effect from 1st Feb 2019 but is yet to be notified. Hence, not applicable until then.
A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year*.
Due date for GSTR-4 for the period Oct-Dec 2018 is 18.01.2019
Also, note that a dealer registered under composition scheme is not required to maintain detailed records.
The following are the advantages of registering under composition scheme:
Let us now see the disadvantages of registering under GST composition scheme: