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Composition Scheme GST

The document outlines the key details of India's GST composition scheme, including who can opt-in, conditions for availing it, tax rates, and advantages and disadvantages. Taxpayers with annual turnover below Rs. 1.5 crore can opt-in, except for certain supplier types like manufacturers of specific goods. Opting-in means not claiming input tax credits and restrictions on inter-state supply and supply of exempt/e-commerce goods. Composition dealers pay a flat tax rate on turnover and have lesser compliance but also limited business territory and no input tax credits.

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Uttiya Basu
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420 views3 pages

Composition Scheme GST

The document outlines the key details of India's GST composition scheme, including who can opt-in, conditions for availing it, tax rates, and advantages and disadvantages. Taxpayers with annual turnover below Rs. 1.5 crore can opt-in, except for certain supplier types like manufacturers of specific goods. Opting-in means not claiming input tax credits and restrictions on inter-state supply and supply of exempt/e-commerce goods. Composition dealers pay a flat tax rate on turnover and have lesser compliance but also limited business territory and no input tax credits.

Uploaded by

Uttiya Basu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Who can opt for Composition Scheme

A taxpayer whose turnover is below Rs 1.5 crore* can opt for Composition Scheme. In case of North-
Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.

Turnover of all businesses registered with the same PAN should be taken into consideration to calculate
turnover.

2. Who cannot opt for Composition Scheme

The following people cannot opt for the scheme:

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.

3. What are the conditions for availing Composition Scheme?

The following conditions must be satisfied in order to opt for composition scheme:

No Input Tax Credit can be claimed by a dealer opting for composition scheme

The taxpayer cannot make any inter-state supply of goods.

The dealer cannot supply GST exempted goods

Taxpayer has to pay tax at normal rates for transactions under Reverse Charge Mechanism

If a taxable person has different segments of businesses (such as textile, electronic accessories,
groceries, etc.) under the same PAN, they must register all such businesses under the scheme
collectively or opt out of the scheme.

The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard
displayed prominently at their place of business.

The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by
him.

Those supplying goods can provide services of upto Rs. 5 lakh

4. How Should a Composition Dealer raise bill?


A composition dealer cannot issue tax invoice. This is because a composition dealer cannot charge tax
from their customers. They need to pay tax out of their own pocket.

Hence, the dealer has to issue a Bill of Supply.

The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at
the top of the Bill of Supply.

5. What are the GST rates for a composition dealer?

Following chart explains the rate of tax on turnover applicable for composition dealers :

6. What are the advantages of Composition Scheme?

The following are the advantages of registering under composition scheme:

Lesser compliance (returns, maintaining books of record, issuance of invoices)

Limited tax liability

High liquidity as taxes are at a lower rate

7. What are the disadvantages of Composition Scheme?

Let us now see the disadvantages of registering under GST composition scheme:

A limited territory of business. The dealer is barred from carrying out inter-state transactions

No Input Tax Credit available to composition dealers

The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.

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