Skip to content

Composition Scheme under GST – Eligibility, Tax Rate, Conditions

Under GST the Composition Scheme is simple scheme for small taxpayer. They can get relaxation from formalities of monotonous GST and can pay tax at a fixed rate of Turnover too. This composition scheme is applicable only to those persons whose turnover is not exceeding INR 1.5 Crores.

What is the Eligibility for Composition Scheme?

A taxpayer whose turnover is less than INR 1.5 Crores can go for composition scheme, in case the taxpayer is from states which are North Eastern States and Himachal Pradesh then the limit will be INR 75 Lacs. A composition dealer is allowed to supply the services in the range of 10% of turnover or INR 1.5 crores, whichever is higher according to the CGST (Amendment) Act, 2018. This amendment will taking effect from 01-02- 2019. After that in 32nd meeting of Council on 10-01-2019 proposed for an increment in this limit for service providers.

Who are the Ineligible Person for Composition Scheme?

The following person cannot avail for the composition scheme:

  • Manufacturer of ice-cream;
  • Manufacture of tobacco;
  • Manufacture of pan masala;
  • A person who is doing an inter-state supplies;
  • A casual taxable person;
  • A non-resident taxable person;
  • Business who are engaged in supply of goods via e-commerce operator.

Composition Scheme under GST Services:

Manufacturer & Traders Of Goods0.5%0.5%1.0%
Restaurants Which Are Not Serving Alcohol2.5%2.5%5.0%

What are the Condition for Availing Composition Scheme?

  • Dealer can’t claim ITC;
  • Dealer can’t supply non-taxable goods;
  • If there is any transaction of RCM i.e. Reverse Charge Mechanism then the taxpayer will need to pay tax at the rate of normal rate;
  • If the taxable person has many business then he/she will have to opt the Composition Scheme for all the business and not for only one;
  • The taxpayer will need to write ‘Composition Taxable Person’ on all the places & on all the notices where the place of business is.
  • While issuance of bill of supply then also he/she will have to mention ‘Composition Taxable Person’.
  • A composition dealer is allowed to supply the services in the range of 10% of turnover or INR 1.5 crores, whichever is higher according to the CGST (Amendment) Act, 2018.This amendment will taking effect from 01-02-2019.

How Can the Taxpayer Shall get advantage of This Scheme?

The person who wants to opt for this scheme will need to file Form GST CMP-02 with the government, he/she can also file his on GST Portal by logging in. This communication will be done by the person at the every financial year’s start that the person wants to opt for the scheme.

What are the Advantages of Composition Scheme?

These are the advantages for getting composition scheme:

  • Under this scheme There will be lesser compliance,
  • There is also limited tax liability,
  • There will be lower rate so taxes will have huge liquidity.

What are the Disadvantages of Composition Scheme?

These are the disadvantages of availing composition scheme:

  • The taxable person is restricted for supplies which are inter-state,
  • The dealer will not be able claim ITC,
  • The dealer will not able to sell the non-taxable goods too.