Short Analysis of Composition Scheme Under GST

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As we know Composition Scheme acts as an alternative procedure for levying a tax under GST. Small businesses registered under the GST composition scheme can pay GST at a restricted rate of turnover every quarter and file quarterly GST returns. Also, Composition levy would be commonly related to small taxpayers who are supplying goods and services or both to the end customer with low turnover. In this article we will discuss on Composition Scheme Under GST.

Composition Scheme Under GST

Composition Scheme is an easy and manageable scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and spend GST at a restricted rate of turnover. This scheme can be utilized by any taxpayer whose turnover is less than Rs. 1.5 crore. Further, CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.

Who can opt for Composition Scheme?

A taxpayer whose turnover is below Rs 1.5 crore can utilized for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the threshold is now Rs 75* lakh. As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an importance of ten percent of turnover, or Rs.5 lakhs, whichever is bigger.

Who cannot opt for Composition Scheme?

The subsequent people cannot opt for the scheme-

  • Manufactory of ice cream, pan masala, or tobacco
  • An individual making inter-state supplies
  • An agreeable taxable person or a non-resident taxable person
  • Businesses which supply commodities through an e-commerce operator

Eligibility Criteria under GST Composition Scheme

Any prevailing taxpayer whose annual turnover did not strike the Rs.1.5 crore threshold of Rs.75 lakhs in the preceding financial year.

In the case of states under a particular category, except Jammu & Kashmir and Uttarakhand, the threshold of annual turnover has improved from Rs.50 lakhs to Rs.75 lakhs. Hence, the Ministry furnished the turnover threshold for Jammu & Kashmir and Uttarakhand as Rs.1 crore and must register under the GST composition scheme.

Circumstances for Availing Composition Scheme

The following situations must be satisfied to avail of this composition levy scheme.

  • The candidate availing for the GST Composition Scheme must have GST Registration
  • No Input Tax Credit be alleged by a dealer opting for composition scheme
  • An individual must not be an NRI taxable individual or a casual taxable individual
  • The taxpayer cannot bring any inter-state purchases or supply of goods from a branch located outside the state.
  • The merchant cannot supply GST exempted goods.
  • The taxpayer has to spend tax at normal rates for transactions under the Reverse Charge Mechanism.
  • The taxpayer has to mention the words ‘composition taxable person’ on every attention or signboard displayed prominently at their place of business.
  • Those supplying goods can then furnish services of up to Rs.5 lakh,

Validity of Composition Levy

The validity of the composition scheme will vary upon the option practiced by a taxable person to spend tax to remain valid so long as all the conditions are fulfilled as restricted in the law. However, individuals who are capable for the scheme can choose to opt-out of it by simply filing an application.

If you want any other guidance related to GST Registration or GST Return filing, please feel free to talk to our business advisors at 8881-069-069.

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