What is composition scheme under CGST Act ?
It is basically a scheme of presumptive taxation in GST regime.This is intended for very small businesses. So ,if one opt for composition scheme ,
you pay very low tax ,
No need for records maintenance
No need to issue invoice
No need to collect tax
Who can opt for Composition Scheme?
A person can opt for composition scheme if
Supply relates to goods and not the services
annual turnover does not cross 75 Lakh
One exception is service related to food like restaurant
Who cannot opt for composition scheme ?
If you fulfill any of following condition, you are not eligible for composition scheme
Gross turnover is more than 75 Lakh or
You do inter-state supply of goods
Casual taxable person or
non-resident taxable person
If you have stock which were purchased in course of inter-State trade or from unregistered person
What is the tax rate applicable on a composition dealer?
Section 10(1) read with Section 10(2) of the CGST Act provides following rates
1. 1% of turnover in State or turnover in Union Territory in case of a manufacturer;
2. 2.5% of turnover in State or turnover in Union Territory in case of persons engaged in making supplies referred to in Paragraph 6(b) of Schedule II to the CGST Act; and
3. 0.5% of turnover in State or turnover in Union Territory in case of other suppliers.
How to apply for composition scheme ?
If you were already registered with Indirect tax/VAT authorities earlier , and has a provisional registration under GST , use Form CMP-01 and Form CPM-03
Apply in Form CMP02 if you have registered for the first time
I heard there is no need of maintaining detailed records under composite scheme?
Yes, a dealer registered under composition scheme need not maintain detailed records .
What to do when I find I am not eligible for any reason ?
File Form CMP-04 for cancellation of registration with composition scheme
Can I get Input Tax Credit if I opt for composition scheme ?
No, input tax credit of GST is not allowed if you opt for composition scheme
A buyer from composition dealer will not be able to claim input tax on such goods.
Can I issue invoice to a buyer if I opt for composition scheme?
No. a composition dealer cannot issue a tax invoice .
What are the returns to be filed by a person opting for composition scheme ?
Two types of returns required to be filed by person option for composition scheme
GSTR-4 on a quarterly basis and
an annual return in FORM GSTR-9A
What about the liability to pay taxes under Reverse Charge Mechanism if one opts for the Composite Scheme?
Any tax payable under Reverse Charge Mechanism will have to be paid as a normal taxpayer.
Is there any penalty for people opting for composition scheme ?
Yes, it is proved that you have wrongly availed the benefit under the composition scheme, then you are liable to pay
all the taxes which he would have paid under the normal scheme.
to pay a penalty equivalent to an amount of tax payable
Please note that penalty can not be levied without giving a show cause notice to the dealer.
I opted for composition scheme. Now , my turnover has crossed . What law is to follow ?
Then, you will be allowed to take credit of input held in
stock, or
in semi-finished goods or
in finished goods
on the day immediately preceding the date from which they opt to be taxed as a regular tax payer
