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Composition Scheme under GST


Who can opt for composition scheme?

  1. Manufacturers
  2. Restaurants
  3. Other suppliers of goods

The turnover must be within Rs 75 lakh.

This limit has been reduced to Rs 50 lakh for below states

Arunachal Pradesh  ,Assam , Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Himachal Pradesh.

Who cannot opt for composition scheme?

  1. Service providers other than restaurants
  2. Any business that makes inter-state supplies
  3. Any business registered on an e-commerce platform
  4. Manufacturers of ice cream, edible ice, pan masala, tobacco, and tobacco substitutes.

Rates of tax for composition scheme:

  1. Manufacturers – 2%
  2. Restaurants – 5%
  3. Other suppliers – 1%

These rates are an aggregate of CGST and SGST rates and will be the final rate of tax payable by composition dealers based on their turnover.

Returns of a composition dealer:

Composition dealer will file GSTR-4 on a quarterly basis and an annual return in FORM GSTR-9A.

Other restrictions:

  1. Cannot claim any input tax credit.
  2. Cannot charge GST on the invoice to customers. They are not supposed to collect any tax on sales. The tax they pay is like a turnover tax; it goes from their own pocket.
  3. They will not issue a tax invoice, rather a ‘bill of supply’.
  4. The business owner must also mention “composition taxable person” on his signboard displayed at his place of business.
  5. The day they cross the turnover threshold or make an inter-state sale, their composition scheme registration stops being effective from that day. And they must start paying regular GST taxes from such date. They also must inform the tax department within the next seven days; there is a specific GST form for this which can be filed online.
  6. A word of caution for those who may apply incorrectly or fail to seek regular registration when they no longer meet the conditions—strict penalties apply.

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