Composition scheme is one such provision crafted for the taxpayers who do not wish to avail of the Input Tax Credit under GST and who have an aggregate annual turnover as per the limits prescribed.
This article will discuss some of the essential FAQs about the GST Composition Scheme & discuss the eligibility required to opt for the composition scheme.
Who can opt for Composition Scheme under GST?
The taxpayers whose annual aggregate income is as follows can opt for the Composition Scheme under GST:
Aggregate Turnover (for previous FY)
Up to Rs.1.5 Cr
Up to Rs. 75 Lakhs
For registered taxpayers located in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura & Uttarakhand,
Upto Rs. 50 Lakhs
Taxpayers supplying services
However, the following taxpayers are NOT eligible to opt for the Composition levy scheme under GST:
GST Tax Slabs For Composition Dealers
Under the GST Scheme, the tax slabs are different compared to the taxpayers under the normal scheme.
Observe the following table to understand the tax break up for the composition scheme taxpayers under GST:
Manufacturers of Goods
Restaurants NOT serving alcohol
Service Providers other than those mentioned above
Now, we are familiar with some of the essential pre-requisites before we get into the steps to opt for the Scheme Under.
Steps to choose GST Composition Scheme for FY 2021-22
The taxpayer must file the FORM GST CMP-02 on the GST portal.
Step 1: Log in to the GST portal with the credentials.
Step2: Click on the ‘Services’ tab. Now click on the ‘Registration’ option and then click on the ‘Application to Opt for Composition Scheme.
Step 3: On the next screen, your business details will be shown. Fields like GSTIN, the Name of the business and address will be auto-populated by the portal.
Step 4: After checking all the boxes at the bottom, you must digitally sign the form and submit it.
You have three options to sign the form as follows digitally:
- Submit with DSC
- Submit with E-Sign
- Submit with EVC
In this way, you can opt for the Composition Scheme under GST.It is important to note that the taxpayer should file the FORM GST CMP-02 before the beginning of the next financial year. i.e. before 31st March of the preceding financial year
Important FAQs about GST Composition Scheme
What are the GST payments for the composition taxpayers?
Following is the shortlist of the GST payments that the composition dealers should make:
- GST on the supplies they make
- Prescribed tax on the Reverse Charge
- Tax when you purchase goods from an unregistered dealer
What is the return filing system for the composition dealers?
Can Composition dealer avail Input Tax Credit on his inward supplies?
- No, the person opting for the Composition under GST is NOT eligible to avail Input Tax Credit under GST.
- He is NOT allowed to avail ITC on his inward supplies.
- However, when the taxpayer switches over from the scheme to the normal scheme, he can take credit on the date of transition.
Should a Composition dealer file monthly returns?
GST experts advise making your quarterly return filing more efficient; you must choose an GST filing software. This takes care of all the compliance issues, and the automatic filing of the returns saves your efforts and business time.
Merits & Demerits of GST Composition Scheme
Following are some of the merits for registering under the GST composition scheme:
The decision to opt for the Composition scheme should be taken by the taxpayer after due diligence as the taxpayer here will NOT be eligible to avail of the Input Tax Credit under GST.
The taxpayers who are comfortable with the terms of the scheme should only opt for it and not the businesses for which claiming Input Tax Credit is vital to keep the capital flow for the business uninterrupted.
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Until the next time…