Composition scheme made for small dealer, manufacturer, service provider. The purpose of this scheme is to simplify the compliance for small dealer because its difficult for small business man to comply with the GST Provision.
Who is eligible for composition scheme
A registered person may opt composition scheme if
- He is not engaged in supply of services other than the business of restaurant.
- He is engaged in supply of goods which is not taxable under this Act (alcoholic liquor for human consumption).
- He is not dealing in interstate supply of goods.
- He is not supplying goods through E commerce Operator who is liable to collect Tax at Sources under section 52.
- He is engaged in manufacturing of goods which is notified by Government
- He shall not be casual taxable person
- He shall not be non-resident
Such above person can opt for composition scheme only if his aggregate turnover not exceeding 75 lakh in previous year.
Further if person registered under composition scheme, having single PAN, then he shall have to take registration under composition scheme for other state
In case turnover of the registered person exceeds the limit of 75 lakh then composition scheme shall automatically lapsed from the day on which limit exceeds.
Registered person opting for composition scheme shall not collect tax on supplies made by him and also not take credit of input tax.
Registered person opting for composition scheme shall display on board that he is COMPOSITION TAXABLE PERSON.
Taxpayer shall not be casual taxable person
Taxpayer shall not be non-resident
If person opting composition scheme by making false declaration then he shall be liable for penalty under section 73 and 74 of the Act.
Aggregate turnover means value of all supply
- Taxable supply
- Exempted supply
- Export
- Interstate supply (including branch supply)
Tax rate under Composition scheme
| Categories | CGST | SGST | Total |
| Manufacturer | 1% | 1% | 2% |
| Supplier | 0.50% | 0.50% | 1.00% |
| Restaurant | 2.50% | 2.50% | 5.00% |
Input tax credit under composition scheme
Registered person shall not
- Take credit of input tax paid on inward.
- Collect tax on outward supplies
Merit of composition scheme
Payment of tax at lower rate
Quarterly return filing instead of monthly
Demerit of composition scheme
Person registered under composition scheme shall not
- Issue taxable invoice thus can’t pass-on credit.
- Buyer from such person shall not be eligible for credit.
- Cant not made export
Return filing under composition scheme
Person registered under composition scheme shall file return in GSTR-4 in quarterly basis and annual return in GSTR-9A
Due date of filing of return under composition scheme
| Frequency | Return type | Due date |
| Quarterly | GSTR-4 | 18th of month succeeding of qtr |
| Annual return | GSTR-9A | 31st of Dec |
Switch over from composition to normal and vice-versa
From normal to composition scheme
In case dealer already registered under GST and wishing to opt composition scheme then he shall file and application in FORM GST CMP-02 prior to commencement of year and also file FORM GST ITC-3 within 60 days of commencement of financial year.
Taxpayer has to pay tax on equal to amount of input tax credit taken on stock held on the day of switch over