Seamless flexible, outperforming features, and a concise rate of GST composition scheme is one of the bodies of GST. Especially made for small taxpayers business to operate fruitfully and save them from filing multiple GST returns in a month.
Here I have addressed the guide around GST composition. Get understand with its benefits, know GST composition rates, eligibility, and more here in this blog.
Also Read: Change in Firm Name in GST Registration Certificate
What is the composition scheme for GST?
Goods and Services Tax law has several schemes for GST. Here, GST under composition scheme is one from the glossary which is introduced for small traders or small businesses.
Under this regime, small enterprises can pay tax at a minimum rate depending on their respective turnover. Further, the rate and its preceding rules and regulations is pre-defined by the GST Council which consists of the finance ministers of the central government and all the states.
Who is eligible for the GST composition scheme?
Having said that, the composition scheme is an easy and simple scheme under GST for taxpayers. The features presented under the scheme helps small taxpayers get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
However, this scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore (CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores).
Who is not eligible for composition under GST?
It’s simple the one who don’t match with the above mentioned criteria are not eligible for composition scheme under GST. Going in the detail, the following are the persons who cannot and in anyhow opt for GST composition scheme.
- Service providers (other than the person engaged in the supply of food and drinks i.e. restaurant services).
- Producer of pan masala, or tobacco, ice cream.
- A non-resident taxable person, Casual taxable person.
What will happen if I opt out of the composition scheme mid-year?
If a trader or dealer or merchant is thinking of opt or switching out of composition scheme all the GST composition rules and regulation plus rates are applicable from the day of opting out.
For example, a composition dealer opts out of a composition scheme on 15th july 2020. This means that the dealer will have to file two CMP-08 for the quarters of April – June, and July (15 days). The dealer will also have to file GSTR-1 and GSTR-3B for the period of July 2020 (sales from 15th July until end of the month).
Can I opt-in for a composition scheme anytime during the year?
The vocal of GST laws that constriat by the government says that no entity or person can opt-in for a composition scheme anytime during the year. The law also acknowledged that before the beginning of every financial year, a registered taxpayer is required to provide a declaration on the GST Portal. Thus, which cannot be done anytime during the year.
What are the advantages of Composition Scheme?
The following are the advantages of registering under composition scheme:
- Lesser conformity
- Limited tax liability
- High liquidity as taxes are at a lower rate
What are the disadvantages of Composition Scheme?
The following are the disadvantages of registering under GST composition scheme:
- The dealer is restricted from carrying out inter-state transactions
- No Input Tax Credit available to composition dealers
- The taxpayer will not be eligible to supply non-taxable goods under GST consisting of alcohol and goods through an e-commerce portal.
What are the GST composition rates for a composition registered dealer?
Look at below table to understand about the tax rate on turnover applicable:
| Composition scheme - Applicable GST Rate |
| Type of Business | CGST | SGST | Total |
| Manufacturer and Traders (Only Goods) | 0.5% | 0.5% | 1.0% |
| Restaurant (non alcohol serviceable) | 2.5% | 2.5% | 5.0% |
Note: Service providers strictly non-eligible for composition scheme
How can a taxpayer opt for a composition scheme?
Enrollment for composition schemes under GST can be easily and systematically done online by logging into GST portal. Taxpayers have to file GST CMP-02 with the government.
What are the returns to be filed by a composition dealer?
Taxpayers under GST composition enrolled scheme enjoying filing of statements on quarterly basis rather multiple times in monthly. A dealer is required to pay file tax on a quarterly statement CMP-08 by 18th of the month after the end of the quarter.
However, GSTR-9A is an annual return to be filed by 31st December of the next financial year
GST Registration (Composition) Online Anywhere in India
Want to get benefited from the GST composition scheme? Register your business under the composition GST scheme online at TaxWink. Assured fast and secure service, no physical presence required, easy to process from anywhere in India.
