Compisition Scheme Under GST Explained
The Government introduced the Composition Scheme under the GST to facilitate small and medium-sized businesses in the country. Businesses dealing in certain goods and services and having an annual turnover of less than Rs 1.5 Cr can apply for the composition scheme. The composition scheme offers businesses lower tax liability, reduced paperwork, and easy-to-meet compliance.
Once the taxpayers switch from a regular to a composition scheme, they are required to file one quarterly return through GSTR 4 and one annual return reported in GSTR 9A only. Composition taxpayers have to pay tax at a fixed rate ranging from 1% to 6% based on the annual turnover and type of business.
Who cannot Opt for the Composition Scheme?
Certain businesses are exempted from the composition scheme; they cannot switch to this scheme. Refer to the following points to know about exempted businesses
- A casual taxable person or a non-resident taxable person
- Taxpayers dealing in interstate supplies or exempt supplies
- Manufacturer of ice cream, pan masala, and tobacco
- A manufacturer of goods or a service supplier notified by the government on the GST council recommendations
- An e-commerce operator is liable to collect TCS
Situations Under Which You Can Avail the Composition Scheme
Composition scheme taxpayers cannot claim an input tax credit.
- A taxpayer dealing in non-taxable goods under GST cannot apply
- Suppliers of goods and services except interstate supplies, non-taxable supplies, and those under the Reverse Charge Mechanism
- Meeting quarterly tax liabilities
- All other segments registered with the same PAN of a taxpayer have to be registered under the scheme collectively
- Mention “composition taxable person” on each supply issued
- Businesses have an aggregate turnover of less than Rs 5 Cr and Rs 75 Lakh in North-Eastern States and Himachal Pradesh
GST Rates under the Composition Scheme
| Business Type | CGST | SGST | Total |
| Manufacturer and Trader of 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% |
How Regular Taxpayers Can Switch to the Composition Scheme?
Individuals willing to switch to a composition scheme and meet eligibility criteria have to file GST CMP-02. This form is available on the official website of the GST, and you can fill the same by logging into the portal.
Taxpayers have to give intimation to the government that they are planning to move to a composition scheme by filing CMP-02, while migrated taxpayers have to file CMP-01. (Migrated taxpayer refers to the one who was registered under the old tax regime in India and later switched to GST after its inception)
Get Started with TaxDunia
Suppose taxpayers are aware that they fulfill all the criteria mentioned in the article. In that case, they can apply now for the composition scheme so that they can manage better cash flow better and meet compliance easily.
Opting for a composition scheme by yourself without help from an experienced professional can be quite time-consuming. To ensure an easy switch from regular or any other scheme to a composition scheme, reach out to TaxDunia. We are happy to serve you and witness your exponential growth.
