A guide on Composition Scheme under GST

Last Updated On: March 12, 2022, 1:54 p.m.
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A GUIDE ON COMPOSITION SCHEME

INTRODUCTION:

The Composition Scheme under GST is a scheme that offers comparatively lesser compliance. Small taxpayers can get rid of various GST formalities and can pay GST at a fixed rate of turnover. For fresh registrations under the GST Composition Scheme, an intimation in Form GST REG- 01 must be filed.

 

Who cannot opt for Composition Scheme?

  • This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 Crores. In case of North-Eastern states and Himachal Pradesh, the limit is Rs 75 lakhs.
  • Persons ineligible to Opt GST composition scheme-
  • Manufacturer of ice cream, pan masala, or tobacco.
  • Casual Taxable Person or a Non-resident Taxable Person
  • Supplier of services other than restaurant related services(i.e.Restaurants are allowed)
  • Taxpayer supplying Exempt supplies Businesses that supply goods through e-commerce operators


 

What are the conditions for opting for Composition Scheme?

  • 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.
  • No Input Tax Credit can be claimed by a dealer opting for a composition scheme
  • The dealer cannot supply goods not taxable under GST such as alcohol.
  • The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism
  • As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019.
  • The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.

 

 

How can a taxpayer opt for a composition scheme?

To opt for a composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal. This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme. 

 

What are the steps to file GST CMP-02?

Step 1 – Login to GST Portal.  

Step 2 – Go to ‘Services’ > ‘Registration’ > ‘Application to Opt for composition Levy’.  

 

 

Step 3 – On this window read the ‘Composition Declaration’ and ‘Verification’ carefully and tick on the checkbox. Choose the ‘Name of Authorized Signatory’ from the drop-down. Also, type the ‘Place’ and click on ‘SAVE’.  

 

Step 4 – If you are a Company or an LLP you can only submit the application with DSC. Any other registrant can use any of the three methods to submit the return.  

Step 5 – A pop-up will open containing the warning. Click on ‘PROCEED’ here.

 

Once the application is submitted a success message is displayed. Also, an acknowledgment is sent to your registered email id and mobile.

 

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