GST Composition Scheme: Rates, Eligibility, and Filing Details

In order to ease the process of paying GST, the GST Council has established a simple and easy Composition Scheme for small taxpayers. Small taxpayers are simply allowed to pay GST at a fixed rate of turnover. CBIC has increased the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores. As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. In addition, service providers can also opt into the Composition Tax Scheme. The threshold turnover for service providers has to be at least Rs. 50 lakhs to be eligible.

Persons Ineligible for the GST Composition Scheme

The following assessees cannot opt for GST Composition Scheme:

Inter-state suppliers
Manufacturers of ice-cream, tobacco or pan
A casual taxable person or a non-resident taxable person
Businesses which supply goods via e-Commerce platforms

GST Composition Scheme Rules & Regulations

No Input Tax Credit can be claimed by an assessee
Assessee cannot supply GST exempted goods
The assessee is required to pay tax at normal rates for transactions under the Reverse Charge Mechanism
If a taxpayer has different segments of businesses under the same PAN, they must register all such businesses under the scheme collectively
The assessee has to mention the words ‘composition taxable person’ on every notice and bill of supply issued by them

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GST Rates for Composition Dealers

Composition Scheme - Applicable GST Rates

Business Type	CGST	SGST	Total
Manufacturers and Trader	0.5%	0.5%	1.0%
Restaurants not serving alcohol	2.5%	2.5%	5.0%
Other Service Providers	3.0%	3.0%	6.0%

How should GST payment be made by a composition dealer?

The GST payment comprises of:

GST on supplies made
Taxes on reverse charge
Tax on purchase from an unregistered dealer The payment has to be made out of pocket for the supplies made.

Composition Scheme Billing

A dealer cannot issue a tax invoice since he/she is paying tax out of their own pocket, neither can they charge tax from their customers. Therefore, the dealer has to issue a Bill of Supply.

Composition Scheme Returns Filing

An assessee is required to file a quarterly return (GSTR-4) by 18th of the month after the end of the quarter. The annual return GSTR-9A has to be filed by 31st December of next financial year.

Advantages of Composition Scheme

The merits of this scheme are:

Limited tax liability
High liquidity due to lower tax rate
Lesser compliance

Disadvantages of Composition Scheme

The demerits of this scheme are:

An assessee is not eligible to supply exempt goods or goods through an e-commerce portal
No Input Tax Credit is available to composition dealers
An assessee is not able to carry out inter-state transactions

Frequently Asked Questions

Q. What are the due dates for GST Composition Scheme?
- Ans: The due date for filing GSTR-9, GSTR-9A and GSTR-9C has been extended till 30th June 2019 by CBIC for FY 2017-18 and the due date for GSTR-4 for the period Oct-Dec 2018 is 18.01.2019.
Q. What is turnover?
- Ans: Turnover is the overall sales of a dealer in a single financial year.
Q. How can a dealer opt for GST Composition Scheme?
- Ans: A dealer can opt for composition scheme online by logging into the GST Portal.
Q. What does CBIC stand for?
- Ans: CBIC stands for the Central Board of Indirect Taxes and Customs.