12/06/2020
GST Composition Scheme
Composition Scheme acts as an alternative method for levying a tax under GST. Small businesses registered under the GST composition scheme can pay GST at a fixed rate of turnover every quarter and file quarterly GST returns. Composition levy would be generally related to small taxpayers who are supplying goods and services or both to the end consumer with low turnover. Further, the composition scheme has been designed with the aim to make compliance more accessible and cost-effective for the taxpayers. In this article, let us look at the composition scheme under GST in detail.
Eligibility Criteria
Any existing taxpayer whose annual turnover did not cross the Rs.1.5 crore threshold of Rs.75 lakhs in the preceding financial year.
Special Eligibility
In the case of states under a special category, except Jammu & Kashmir and Uttarakhand, the limit of annual turnover has increased from Rs.50 lakhs to Rs.75 lakhs. Hence, the Ministry provided the turnover threshold for Jammu & Kashmir and Uttarakhand as Rs.1 crore and must register under the GST composition scheme.
Conditions for Availing Composition Scheme
The following conditions must be satisfied to avail of this composition levy scheme.
The applicant availing for the GST Composition Scheme must have GST registration.
No Input Tax Credit can be claimed by a dealer opting for composition scheme
A person must not be an NRI taxable individual or a casual taxable individual
The taxpayer cannot make any inter-state purchases or supply of goods from a branch located outside the state.
The dealer cannot supply GST exempted goods.
The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism.
If a taxable person has different segments of businesses (such as textiles, 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.
In addition, the taxpayer has to mention the words ‘composition taxable person’ on every signboard, notice, and bill of supply issued and not a tax invoice.
Those supplying goods can then provide services of up to Rs.5 lakh,
