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. 1.5 crore*.
You can know whether a taxpayer opted for a composition scheme or not using the GST search tool. Enter any GSTIN and check the ‘Taxpayer Type’ column in the results to know whether the taxpayer is a regular taxpayer or opted for the composition scheme.
*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.
Who can opt for Composition Scheme?
A taxpayer whose turnover is below Rs 1.5 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.
Who cannot opt for Composition Scheme
The following people cannot opt for the scheme-
- Manufacturer of ice cream, pan masala, or tobacco.
- A person making inter-state supplies or exempt supplies.
- A casual taxable person or a non-resident taxable person.
- A person supplying services through an e-commerce operator who is required to collect TCS under the CGST Section 52.
- A manufacturer of such goods or supplier of such services notified by the Government on the recommendations of the GST Council.
What are the conditions for availing Composition Scheme?
The following conditions must be satisfied in order to opt for composition scheme:
- No Input Tax Credit can be claimed by a dealer opting for composition scheme
- The dealer cannot supply goods not taxable under GST such as alcohol.
- The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism
- If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
- The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
- The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
- As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now 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.
Composition Scheme GST Rate for a dealer
Following chart explains the rate of tax on turnover applicable for composition dealers:
| Type of business | CGST | SGST | TOTAL |
| Manufacturer and Traders (Goods) | 0.5% | 0.5% | 1% |
| Restaurants not serving Alcohal | 2.5% | 2.5% | 5 |
| Other Service providers | 3.0% | 3.0% | 6 |
What are the returns to be filed by a composition dealer?
A dealer is required to pay tax in a quarterly statement CMP-08 by 18th of the month after the end of the quarter. Also, a return in form GSTR-4 has to be filed annually by 30th April of next financial year from FY 2019-20 onwards. GSTR-9A is an annual return to be filed by 31st December of the next financial year. It was waived off for FY 2017-18 and FY 2019-20. Also, note that a dealer registered under composition scheme is not required to maintain detailed records.
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