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    Composition Scheme

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    swatimalagi2608

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    © All Rights Reserved
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    Composition Scheme

    Uploaded by

    swatimalagi2608
    2 views2 pages

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    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    2 views2 pages

    Composition Scheme

    Uploaded by

    swatimalagi2608

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Composition Scheme Overview

    • The composition scheme allows a person to pay a lower rate of GST on their outward supply.
    • However, a key disadvantage is that Input Tax Credit (ITC) is not available on purchases.
    • This lack of ITC means that tax paid on purchases becomes a cost.
    • Additionally, the tax on the outward supply (though lower) also comes out of pocket.

    Filing and Payment

    • Returns are filed annually, with the due date for GSTR-4 being April 30th after the financial year.
    • Taxes are paid quarterly using form CMP-08, with a due date of the 18th of the month after each quarter.

    Eligibility for the Composition Scheme

    • A person is eligible if their aggregate turnover in the preceding financial year does not exceed
    ₹1.5 crore.
    • For eight specific states (Manipur, Tripura, Nagaland, Mizoram, Meghalaya, Arunachal Pradesh, Sikkim,
    and a state starting with 'Bu'), the limit is ₹75 lakh.

    Components of Aggregate Turnover

    • Aggregate turnover includes:


    o Taxable supply
    o Exempt supply
    o Interstate supply
    o Export of goods or services
    • Aggregate turnover does not include:
    o GST
    o Inward supply under the reverse charge mechanism
    • All transactions of branches under a single PAN are included.
    • Non-taxable supplies are also included in the aggregate turnover.
    • Interest earned on loans, deposits, and advances is NOT included in the aggregate turnover.

    Persons Not Eligible for the Composition Scheme

    • Persons making interstate outward supplies are not eligible.


    • Non-resident taxable persons and casual taxable persons are not eligible.
    • Persons supplying non-taxable goods or services are not eligible.
    • Persons supplying services through an e-commerce operator required to collect tax under Section 52
    (TCS) are not eligible.
    o Note: Goods suppliers through e-commerce operators CAN opt for the composition scheme.
    • Manufacturers of specific products like pan masala, tobacco, ice cream, aerated water, bricks, and tiles
    (including building bricks, fly ash bricks, bricks of fossil meals, earthen or roofing tiles) are not eligible.
    • Persons providing services exceeding the permissible limit are not eligible. The permissible limit is
    10% of the preceding financial year turnover in a state or ₹5 lakh, whichever is higher.

    GST Rates Under the Composition Scheme

    • For manufacturers and traders (Section 10(1) and 10(2)), the rate is: 0.5% CGST + 0.5% SGST (or 1%
    total) of turnover in a state.
    • For restaurant service providers (Section 10(1) and 10(2)), the rate is: 2.5% CGST + 2.5% SGST (or
    5% total) of turnover in a state.
    • Section 10(2A) for services has a separate rate (3% + 3%) and a limit of 50 lakh in the preceding financial
    year to take benefit in the current financial year.
    • Traders only pay tax on taxable turnover, not on anything else.

    Additional Points

    • All supplies made during the financial year will be counted in aggregate turnover, even if you are not
    registered or have not opted for the composition scheme, though you won't pay taxes on the first 20 lakh.
    This also applies to the 50 lakh/1.5 crore/75 lakh limits.
    • Businesses under the composition scheme will issue a bill of supply, not a tax invoice, because they
    cannot collect tax.
    • When shifting from composition to a regular scheme, a stock statement must be given within 30 days.
    • When shifting from a regular scheme to composition, 60 days is given to provide stock details.
    • A shift from the composition scheme to the regular scheme can occur in three cases:
    o Aggregate turnover exceeds the specified limit in the current year.
    o Any condition of the composition scheme is violated.
    o Voluntarily opting out of the composition scheme (any time is permitted).

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