Composition scheme under GST

Composition scheme under gst - There are two types of tax schemes run in the GST law, in which a person can register - (1) Normal scheme (2) Composition scheme.

If a person wants to get registered under GST , then he can get registered in either of these two schemes. Adopting these two schemes has some advantages as well as some disadvantages.

But, if a person wants to get registered under GST , whose turnover is also not high and does not want to maintain more records or fall in the trap of GST rates, then he should get registered in the composition scheme itself.

However, the composition scheme can be adopted only by those persons who fulfill the specified condition. If a person does not fulfill these specified conditions, then he will have to get registered in the normal scheme only.

In today's article (composition scheme under gst), we will know about the provisions related to composition scheme.

By whom can the composition scheme be adopted? composition scheme under gst

The most important thing is that the composition scheme can be adopted only by those persons whose turnover in the previous financial year is more than Rs. 1.50 crores. If a person has more turnover than this, then he will have to get registered in the normal scheme only.

However, in special category states, this limit is Rs. 75 lakhs. Arunachal Pradesh, Manipur, Uttarakhand, Mizoram, Nagaland, Sikkim, Meghalaya, Tripura have been included in the special category states. For Assam, Jammu & Kashmir, Himachal Pradesh and all other states, the limit of composition scheme will be only 1.50 crores.

Apart from this, earlier the composition scheme could be adopted only by those persons who supplied only goods or only restaurant services.

That is, if a person supplies services along with goods or supplies only services (except restaurant services), then the composition scheme could not be adopted by him. But, now this system has been abolished but with some conditions.

Now if a person supplies any services along with the supply of goods , then composition scheme can be adopted by him, if the turnover of the services to be supplied does not exceed a specified value.
That specified value is –
  • 10% of the turnover of the previous financial year or
  • Rs, 5 lakh
Whichever is more of the two.

For example, if a person's turnover from the supply of goods last year was 1 crore 20 lakhs and he also wants to supply some services along with the goods this year, then his turnover from services would be Rs. 12 lakhs (1 crore 10% of 20 lakhs), then he can adopt the composition scheme.

Persons supplying services only 

As mentioned earlier, the composition scheme can be adopted only by the person providing restaurant services, but keeping in mind the problem of the person providing other services, the service provider has also been given the facility to adopt the composition scheme.

Now registration in the composition scheme can also be done by those service providers who are engaged only in the supply of services, such as - salon stylist, interior designing, tailoring, advertisement, digital marketing services etc. However, the turnover of these service providers in a financial year is Rs. 50,00,000 should not exceed Rs.

That is, the turnover of the service provider is Rs. 50 lakhs, they can now get registered in the composition scheme.

Gst Rates for service provider registered under composition scheme

Service provider will have to pay tax at the rate of 6%, out of which 3% CGST and 3% SGST.

Tax invoice cannot be issued by a service provider registered under composition scheme. Only Bill of Supply can be issued by them.

ITC cannot be claimed under Composition Taxation Scheme, neither tax can be collected from customers nor interstate supplies can be made.

How to get registered in the scheme of paying tax in the composition scheme by the service provider?

If registration is being done for the first time in GST by a service provider, then Form GST CMP-01 will be filed by him,

But if the service provider is already registered in GST and is transferring his GST registration to Composition Scheme, then FORM GST CMP – 02 will be filed by him.

The person registering under this scheme will have to choose the third option in the category of the person in the form CMP 01 or CMP 02.

By which person the composition scheme cannot be adopted?

Composition scheme cannot be adopted by some persons, even if their turnover is less than Rs. be less than 1.5 crores.

Such a person is -
Persons doing Inter State supply ,
Persons supplying goods on which GST is not levied
Person supplying through e-commerce operator
Manufacturer of ice cream, pan masala and tobacco
Casual Taxable Person & Non – Resident Person

Other conditions regarding adoption of composition scheme – composition scheme under GST

  • Tax invoice cannot be issued by a person registered in the composition scheme, nor can GST be collected from its customers .
  • Input tax credit cannot be claimed by a person registered under these schemes.
  • The composition scheme will be applicable to all those persons who are registered with a PAN number, if any of these persons adopts the regular scheme, then all other persons will be excluded from the composition scheme.
  • The stock of the person adopting this scheme should not contain any goods purchased from an unregistered person, and if there is such a stock, tax should have been paid on it on reverse charge basis.
  • If reverse charge is applicable on the person registered in the composition scheme , then tax will be paid by him at the normal rate.
  • His inflated bill of supply will be released on the "composition taxable person, not eligible to collect tax on supplies to be mentioned.