Composition Scheme under GST
Turnover limit under GST Composition Scheme
- North Eastern State and Himachal Pradesh : Rs. 75 Lakhs.
- In other States : Rs. 1 crore .
Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover limit under GST Composition Scheme.
Who can not eligible for GST Composition Scheme?
- Taxpayer supplying exempt supplies.
- Taxpayer having Interstate supplies.
- Supplier of services other than restaurant related services.
- Manufacturer of ice cream, pan masala, or tobacco.
- Casual taxable person or a non-resident taxable person.
- Businesses which supply goods through an e-commerce operator.
Conditions for availing Composition Scheme under GST
- No Input Tax Credit can be claimed by a dealer opting for composition scheme.
- The taxpayer cannot make any inter-state supply of goods.
- The dealer cannot supply GST exempted goods.
- Taxpayer has to pay tax at normal rates for transactions under Reverse Charge Mechanism.
- If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
- The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
- The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
- Those supplying goods can provide services of upto Rs. 5 lakh.
GST rates for a composition dealer
|Type of Business||Tax payable|
|Manufacturer and Trader||1 % of their turnover|
|Restaurants not serving alcohol||5 % of their turnover|
Returns required to be filled by a Composition Dealer
A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year.
Advantages of Composition Scheme under GST
- Lesser compliance like lesser returns, maintaining books of record, issuance of invoices.
- Limited tax liability.
- High liquidity as taxes are at a lower rate.
Disadvantages of Composition Scheme under GST
- A limited territory of business. The dealer is limited to carry transaction within the state only.
- No Input Tax Credit available to composition dealers.
- The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.