Composition Schemes Under GST


What is the Composition Scheme?

Composition scheme is accessible moderate or small businesses who would prefer not to keep the separate GSTR filing for every single transaction and keep up the stock of the considerable number of products independently.

The section 10 of the GST law contains the provisions for the GST registration of a taxpayer under Composition scheme. The major reason of the Composition scheme is to limit the burdens of the taxpayers.Composition scheme under the law is for small companies. This is to convey help to small companies so they need not be troubled with the regulations under the law. Consequently, an alternative has been given where they can select to pay a fixed level of turnover as charges. Composition scheme under GST most would be for the people who are providing Goods and Services to the customers.

Eligibility of Composition Scheme

  • Any taxpayer, whose turnover is less then INR 1.0 Crore, in Rest of India, and less than INR 75 Lakhs in States (the North Eastern States and Himachal Pradesh), can select the composition scheme after GST registration
  • Turnover of all organizations with the same PAN must be added up to calculate the turnover for the composition scheme.
  • Manufacturers of Products, Dealers, and Restaurants can use Composition Scheme..
  • The limit for opting for Composition scheme is prescribed to Rs. 1.5 crores but not yet to be advised by the laws.
  • The taxpayers who cannot opt for Composition scheme are the taxpayer supplying exempt supplies, Supplier of services other than restaurant related services, Manufacturer of ice cream, pan masala, or tobacco, Casual Taxable Person or a Non-resident Taxable Person, Businesses which supply goods through an e-commerce operator.

Benefits of Composition scheme under GST

GST registration for every taxpayer whose annual turnover exceeds 40 lakhs is mandatory under GST laws. It is also necessary for every taxpayer to maintain the records and file GST returns every monthly or periodically. For the small businesses government has announced a Composition scheme where the taxpayer can be exempted from few regulations of GST laws. Following mentioned are the benefits of opting Composition Scheme under GST.

  • Normal taxpayer has to file monthly GST returns and the taxpayers under Composition scheme should file quarterly return.
  • The taxpayer who opts for Composition Scheme is that the tax rate for such taxpayer is nominal.
  • In composition levy, dealer need not worry about his supplier filing return as he cannot take credit and will pay tax at a nominal rate.

Limitations of Composition Scheme under GST

●     No Credit of Input Tax

Any taxpayer registered under Composition Scheme won’t be qualified to get Input Tax credit on purchase of Goods and Services. Likewise, the purchaser of those products won’t get the credit of assessments paid.

●     No Inter-state business allowed

The significant disadvantage of this plan is that the assessee can’t bargain in interstate exchanges or influence import or export of products and enterprises. He is banned from performing such activities which limit his domain for development and can just direct nearby or intra state exchanges.

●     Pay tax yourself

Since the taxpayer isn’t permitted to charge from his purchaser, regardless of the rate being low, he needs to pay out of his own pocket. He isn’t permitted to issue an expense receipt, coming about the weight on the assessee to make good on government obligation.

What are the Composition Scheme Rates under GST

Business Type Traders and Manufacturers Restaurants not serving Alcohol
SGST 0.5% 2.5%
CGST 0.5% 2.5%
Total 1% 5%