What is GST Composition Scheme?
This GST Composition Scheme is an option that is available to a registered taxpayer who needs to inform the tact authorities about their intentions to be registered under the scheme. If the taxpayer fails to comply with the same, they would be treated as an average taxpayer and administered accordingly.
Who can apply for the GST Composition Scheme?
- The person whose turnover is below 1.5 crores can apply for the GST Composition Scheme.
- According to the CGST Act of 2018, the composition dealer can also supply services to the extent of 10% turnover.
- The turnover of all the businesses registered with the same PAN should be considered to calculate the turnover.
Who cannot apply for the GST Composition Scheme?
- A manufacturer of ice cream, tobacco or pan masala.
- A person who is making inter-state supplies
- A non-resident taxable person
- Businesses that supply the good through an e-commerce operator.
How to apply for GST Composition Scheme?
If you are a taxpayer and you wish to apply for this scheme, then you have to follow the steps given below:-
- First, you have to file GST CMP-02 with the government.
- You can file this online also by logging in to the GST Portal.
- This should be given at the beginning of every financial year by the dealer.
What are the conditions for GST Composition Scheme?
Given below are the conditions for the GST Composition Scheme:-
- The dealer for the scheme should claim no Input Tax Credit.
- The dealer can not supply goods.
- The taxpayer should pay Taxat regular rates.
- The taxpayer should mention the words ‘composition taxable person’ in every bill.
Merits of the GST composition scheme
There are many plus points about the GST composition scheme that can surely give the customers many benefits. Given below are some of the benefits provided to the customers:-
- Limited Compliance
- Limited Tax Liability
- High Liquidity
Demerits of the GST composition scheme
So now every scheme or policy has some demerits in them that the customer should also be aware of before buying the policy or the procedure:-
- Limited Territory for Business
- No credit of Input Tax
- No collection of Tax
- Penal Provision
FAQS
✅ What is the limit of the composition scheme in GST?
Any manufacturer or trader having a turnover of less than Rs 1.5 crore in a financial year can opt for the composition scheme. This limit will apply to restaurants (not serving alcohol). However, the threshold limit is Rs 75 lakh for North-eastern states and Himachal Pradesh.
✅ How do you calculate GST in the composition scheme?
The applicable composition scheme GST rate features equal SGST/UGST and CGST split i.e. 1% GST = 0.5% CGST + 0.5% SGST/UGST, 6% GST = 3% SGST/UGST + 3% CGST. The composition levy rates under GST are as follows: 1% of the turnover for traders and other suppliers eligible for composition scheme registration.
✅ What is the difference between GST regular and composition?
While the GST rate can be up to 28% under the regular scheme, the composition scheme has capped the tax rate at 6% for eligible entities. The tax slabs under the composition scheme are 0%, 1%, 2%, 5%, and 6%. However, composition taxpayers can not issue tax invoices as dealers pay the Tax out of their pockets.
✅ What is the difference between GST regular and composition?
While the GST rate can be up to 28% under the regular scheme, the composition scheme has capped the tax rate at 6% for eligible entities. The tax slabs under the composition scheme are 0%, 1%, 2%, 5%, and 6%. However, composition taxpayers can not issue tax invoices as dealers pay the Tax out of their pockets.
✅ What is the GST composition limit?
In its meeting held on 11th June 2017, the GST Council has recommended an increase in the turnover mentioned above limit for Composition Levy for CGST and SGST purposes from Rs. 50 lakh to Rs. 75 lakh in respect of all eligible registered persons, referred to in the sub-section as mentioned earlier.
✅ What is the turnover limit for GST?
Persons providing services need to register if their aggregate turnover exceeds Rs. 20 lakh for normal category states and Rs. 10 lakh for particular category states.
