Jun26
2018GST has brought many compliance requirements with its implementation like return filing, payment of GST on monthly basis etc. Small dealers who operate at relatively lower scale and margins find it difficult to comply with many regulations as dedicated resources and manpower is required for the purpose. In order to provide relief to such small taxpayers, the Government has come up with the concept of "Composition Levy" (aka Composition scheme) under GST. Any dealer registering under GST has two options i.e. Registration as Regular Dealer or under Composition scheme. By opting for composition scheme, the dealer can avail relief from many compliance requirements.
Who can opt for Composition Scheme?
Eligibility to opt for composition scheme is determined on the basis of aggregate annual turnover of a business entity. Any business entity with aggregate annual turnover up to 1.5 crore can opt for composition scheme. In special category states, this limit is 1 crore.
Sr. No. | Category of State | State Name | Annual Aggregate Turnover Limit |
1 |
Special Category States |
Arunachal Pradesh Assam Jammu & Kashmir Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Himachal Pradesh Uttarakhand |
1 Crore |
2 | General Category States | All Other States | 1.5 Crore |
What is Aggregate Turnover?
“Aggregate turnover” means the aggregate value of:
to be computed on all India bases and excludes taxes, if any, charged under The CGST Act, SGST Act and the IGST Act, as the case may be;
Note: Explanation – Aggregate turnover does not include the value of supplies on which tax is Levied on reverse charge basis and the value of inward supplies.
Who cannot opt for Composition Scheme?
A business entity is not eligible to opt for composition scheme in following cases:
A. Where the business is engaged in the supply of following goods:
B. Where the business is engaged in the supply of any type of services except services covered under clause (b) of paragraph 6 of Schedule II.
C. Casual Taxable person or a Non Resident Taxable Person cannot opt for composition scheme.
Rules for Composition Scheme:
Registration under Composition Scheme:
A dealer eligible and willing to opt for composition scheme needs to register itself with GST. GST registration process for composition scheme can be enumerated from two scenarios as follows:
1. Fresh Registration: A dealer seeking fresh registration under GST and opts for composition scheme needs to apply for the same in Part B of REG - 01.
2. Migration from Regular Dealer to Composition Scheme: If a dealer is already registered with GST as Regular Dealer and wishes to switch to composition scheme needs to apply for the same in the form GST CMP - 02. The application must be made prior to completion of financial year. Such dealer must also provide details of stock held by him at the time of applying for composition scheme in the form ITC - 03. ITC - 03 must be submitted within 180 days from the commencement of Financial Year.
Note: If a regular dealer has taken ITC for the input held by it in stock and opts for composition scheme shall pay an amount by debiting Electronic Credit / Cash Ledger.
Applicable rate of GST for Composition Scheme:
Sr. No. | Category of Registered Person | Rate of tax (CGST + SGST) |
1 | Traders & Manufacturers (other than manufacturers of such goods as may be notified by the Government) | 1% of turnover |
2 | Restaurant & Catering Services | 5% of turnover |
Returns for Composition:
Composition dealer needs to file GSTR - 4 on 18th day of the month following the quarter. Also, an annual return GSTR - 9A needs to be filed on or before 31st December of the next financial year.
Renewal of registration under Composition scheme:
Input Tax Credit: