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Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be availed by any taxpayer whose turnover is less than Rs. 1.0 crore.
The composition scheme is an alternative method of tax levy under GST designed to simplify compliance and reduce compliance costs for small taxpayers.
The composition scheme is applicable to manufacturers or traders whose taxable business turnover is up to ₹1.5 crore (₹75 lakh in case of North-Eastern States). A service provider can opt for the scheme if his taxable turnover is up to ₹50 lakh. The applicable tax rates under the composition scheme are 1 per cent (0.5 per cent Central GST and 0.5 per cent State GST) of turnover in case of manufacturers and traders, 5 per cent in the case of restaurants (not serving alcohol) and 6 per cent for other service providers. The tax is to be paid from tax payer’s own pocket without charging it to the customer.
Note: CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.
If a person is supplying the following are not eligible to opt for this scheme:
Instead of filing 3-4 returns monthly, taxpayers registered under this scheme will be required to file returns once every quarter. GSTR 4 must be filed by 18th of the month succeeding the relevant quarter.
The option to pay Goods and Services Tax (GST) at reduced rate of 6% would be effective from the beginning of the financial year or from the date of obtaining new registration during the financial year.
Service providers opting for the composition scheme can charge a lower tax rate of 6% from customers, as against the higher rates of 12 and 18% for most services under GST.
In a circular, the Central Board of Indirect Taxes and Customs (CBIC) said suppliers who want to opt for composition scheme would have to file Form GST CMP-02 by selecting ‘Any other supplier eligible for composition levy’ latest by 30 April, 2019.
Businesses which apply for new registration may avail the said benefit in Form GST REG-01 at the time of filing application for registration.
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