Composition Scheme in GST: Eligibility, Forms & Tax Rates

Composition is an alternative to regular tax collection methods, enabling micro and small businesses to start and thrive without worrying about compliance issues. In this blog, we have addressed all the basic questions related to the composition scheme in GST. 

What is the Composition Scheme in GST

The GST Composition Scheme is an alternative to the regular levying of indirect tax. The scheme is enacted especially for small businesses to relieve them of the complex compliance process. Under this scheme, GST is levied at a fixed turnover rate, and the return is filed every quarter. The scheme aims to establish that compliance obligations should be a hindrance in growing a business.    

GST Composition Scheme Rules

Following are the rules that you need to adhere to lower the burden of compliance obligations with the composition scheme in GST:

• Should have a valid GST registration
• Cannot claim Input Tax Credit (ITC)
• Taxpayers should be residents of India. NRI or casual taxable are not eligible
• Interstate purchases or the sale of goods are prohibited.
• Businesses cannot engage in the dealing of GST exempted goods.
• For transactions under RCM, businesses/taxpayers have to pay taxes at normal rates. 
• Those businesses supplying goods can supply services up to Rs. 5 lakh. 
• If the taxpayer has one or more business verticals under the same PAN, they must either opt in or out of the scheme collectively. 
• The taxpayers must mention the words ‘composition taxable person’ on notice or signboard displayed prominently at their place of business. 
• Apart from that, taxpayers are required to mention the words ‘composition taxable person’ even on the bill of supply. 

What are the Eligibility Criteria for the Composition Scheme in GST? 

The company’s annual turnover is the main eligibility criteria for the Composition scheme. You can opt for a composition scheme if the annual turnover is less than 1.5 Crores. However, this turnover limit is reduced to Rs. 75 lakhs for the north-eastern states of India, as listed below: 

• Himachal Pradesh
• Arunachal Pradesh
• Mizoram
• Nagaland
• Sikkim
• Tripura
• Assam
• Manipur
• Meghalaya

Applicable GST Rates Under Composition Scheme

Business category	GST %
Manufacturers (except ice cream, pan masala, tobacco products, etc.)	1% (0.5% CGST + 0.5% SGST/UTGST)
Restaurant (not serving alcohol)	5% (2.5% CGST + 2.5% SGST/UTGST)
Eligible service providers (or goods and service suppliers)	6% (3% CGST + 3% SGST / UTGST)
Traders or any other supplier eligible for composition levy	1% (0.5% CGST + 0.5% SGST/UTGST)

Purpose of Various Composition Scheme (GST) Forms

Under the current GST rules and regulations, tax payers/businesses registered under the composition scheme are required to submit various forms for diverse purposes. The form name/no., its purpose and the due date is mentioned in the table below: 

Sr. No.	Form no.	Purpose	Due date
1	Form GST CMP 01	Tax payment under composition (provisional registration)	Within 30 days of GST registration
2	Form GST CMP 02	To furnish information related to stock and inward supplies from unregistered individuals	Before starting of the financial year
3	Form GST CMP 03	To opt-out from the composition scheme	Within 60 days of the exercise of an option
4	Form GST CMP 04	Show-cause notice on contravention of the Act or rules by the proper officer	Within seven days of the occurrence of the event
5	Form GST CMP 05	To reply to show cause notice	On contravention
6	Form GST CMP 06	An issue of order	Within 15 days
7	Form GST CMP 07	Registration under the Composition Scheme	Within 30 days
8	Form GST REG 01	To furnish information related to inputs in the stocks of finished or semi-finished goods	Prior to the appointed date
9	Form GST ITC 01	Intimation of ITC available	Within 30 days of the option withdrawn
10	Form GST ITC 13	Intimation of willingness to opt for the scheme	Within 60 days of starting a new financial year

Conclusion

This blog was all about composition schemes in GST. After reading this blog, you will know everything about the composition scheme in GST. If you are struggling to file GST returns, then do consider signing up with Munim GST software.  

FAQs on Composition Scheme in GST

Who can not opt for a composition scheme​ in GST?

Businesses falling into any of the following categories/criteria are generally not eligible for composition scheme in GST: 

• Involved in inter-state supplies 
• Engaged in non-taxable supplies 
• Selling through e-commerce operators 
• Higher turnover than the threshold (1.5 Cr annual turnover)

How to avail the composition scheme under GST?

File an application form GST-CMP-02 with the GST Portal before the commencement of the financial year for which you want to avail of the composition scheme. 

How to change the composition to a regular scheme in GST?

Following are the steps to switch from composition to a regular scheme in GST: 

Step 1: Log in to the GST Portal with your valid credentials 

Step 2: Go to the ‘Services’ tab and click on ‘Registration’ 

Step 3: Select the ‘Application for Conversion from Composition Levy to Regular Levy’

Step 4: Fill in the required information, such as legal name, GSTIN and the reason for conversion. 

What is the benefit of the composition scheme under GST​?

The main benefit of the composition scheme is that it reduces compliance burden from businesses and thereby lowers compliance costs. 

How do you make an invoice under the GST composition scheme​?

Following is the invoice format that you should follow if you have opted for a composition scheme in GST:

• Name (of the supplier)
• GSTIN (of the supplier)
• Address (of the supplier)
• Unique invoice number
• Date of issue
• Description of goods or services being sold
• Name, address, and GSTIN of the recipient  (if registered)
• Total amount 
• Tax amount (if applicable)
• Discounts (if any) 
• Signature of the supplier