GST Composition scheme

 

GST Composition scheme

GST Composition scheme is a scheme available to small taxpayers who are registered under the Goods and Services Tax (GST) in India. This scheme allows taxpayers to pay taxes at a fixed rate on their total turnover without having to calculate the tax on individual transactions. Under this scheme, taxpayers are required to pay taxes at a flat rate on their turnover without claiming input tax credit. The composition scheme is available to taxpayers with an aggregate turnover of up to Rs. 1.5 crore in the previous financial year. The rate of tax applicable under the composition scheme is 1% for manufacturers, 2.5% for traders and restaurants, and 0.5% for suppliers of services.

Who cannot opt for Composition Scheme

The following people cannot opt for the scheme-

1.      A casual taxable person or a non-resident taxable person

2.      Manufacturer of ice cream, pan masala, or tobacco

3.      A person making inter-state supplies

How can a taxpayer opt for composition scheme?

A taxpayer can opt for a composition scheme by filing Form GST CMP-02 on the GST portal. This form is available on the GST portal and can be filled and submitted online. The taxpayer must also submit a hard copy of the form to the jurisdictional tax officer. The taxpayer must also pay the applicable composition levy and submit any other documents as required.

How Should a Composition Dealer raise bill?

A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket. Hence, the dealer has to issue a Bill of Supply. The dealer should also mention “composition taxable person, not eligible to collect tax on supplies”  at the top of the Bill of Supply.

What are the GST rates for a composition dealer?

Following details explains the rate of tax on turnover applicable for composition dealers :

Composition Scheme- Applicable GST Rates

Types of Business	CGST	SGST	TOTAL
Manufacturer and Traders (Goods)	0.5%	0.5%	1.0%
Restaurants not serving alcohol	2.5%	2.5%	5.0%
Other Service Provider	3.0%	3.0%	6.0%

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