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The Composition Scheme under GST is a simplified compliance option available to small taxpayers with a turnover up to ₹1.5 crore (₹75 lakh for special category states). It allows eligible businesses to pay tax at a fixed rate on their turnover without collecting GST from customers. To opt for this scheme, a taxpayer must register under GST and file Form CMP-02. However composition taxpayers are allowed to make only intra-state taxable supplies.
They are not permitted to :
1) Supply exempt goods/services
2) Make inter-state sales
3) Engage in supplies attracting reverse charge
4) Cannot issue tax invoices
5) Claim Input Tax Credit (ITC) on purchases.
GST rate: Composition taxpayers are required to pay GST at a rate of 1% (5% for restaurants & 6 % on Specified Services) on their taxable supplies.
Return Filing: A dealer opting for the Composition Scheme is required to furnish one quarterly return in Form CMP-08 and an annual return in Form GSTR-4 by 30th June following the end of the financial year.
Change in Eligibility: In case a composition taxpayer crosses the aggregate turnover threshold, he must file a declaration in Form GST CMP-02 and opt out of the composition scheme. He must then obtain a normal GST registration and pay GST at the applicable rate.
The Composition Scheme simplifies GST compliance by allowing businesses to file returns on a quarterly basis rather than monthly, significantly reducing administrative effort.
Businesses under this scheme are not required to maintain detailed records of individual purchases and sales, which helps save time and minimizes documentation requirements.
Composition taxpayers pay tax at a reduced flat rate on their turnover, which is generally lower than the standard GST rates applicable to regular taxpayers.Filing ITR is a statutory obligation for individuals whose taxable income crosses the specified limit. Complying with this requirement helps you steer clear of penalties and legal issues related to non-compliance
With simpler compliance requirements and no obligation to maintain extensive records or face frequent audits, businesses under the scheme enjoy lower administrative expenses.
Being registered under GST may make small and medium enterprises eligible for various government schemes and incentives, thereby supporting their growth and development.
GST registration demonstrates a business’s compliance with tax laws, thereby improving its credibility with suppliers, customers, financial institutions, and other stakeholders.
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