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(1) What is the composition scheme (levy) under GST Act

Composition scheme (levy) under GST law have been introduced by the govt. for the benefit of taxpayers who are small & medium sized businesses to have less compliance burden as compared to the regular taxpayers. Also the composition taxpayers (dealers) have to pay GST at the flat rate and therefore they do not have to decide the rate of GST regardless of which product they sell. Composition scheme (Levy) is voluntary and optional. Taxpayer can choose this option only if they finds the benefits from the scheme otherwise they continue as a regular taxpayer.

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(2) Which are the advantages available for opt-in Composition Scheme (Levy) under GST

The taxpayers (dealers) who are opting for the composition scheme have to do easy compliance as they do not have to maintain elaborate accounts and records for the purpose of GST. They have to file Simple Quarterly Return. They have to make Quarterly payment of tax. High liquidity as tax rates are as lower as around 1%. GST rates have been fixed as per category of taxpayers. Hence, they are not supposed to decide it as per tariff notified under the GST Act.

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(3) Which are the disadvantages to taxpayers who opt-in for Composition Scheme (Levy) under GST

Taxpayers opting for composition scheme can only do the business in territory of their registration only (e.g. taxpayer (dealer) registered in Punjab state can only do business within Punjab only). The taxpayer (dealer) is not allowed to carry out inter-state transactions (e.g. taxpayer (dealer) registered in the Punjab is not allowed to transact in any other state outside the territory of Punjab). The Input Tax Credit is not available to composition taxpayers (dealer). The taxpayer (dealer) is not allowed to make supply of non-taxable goods under GST (e.g. alcohol) and they cannot sell goods through an e-commerce portal. Taxpayers who opts for composition scheme have to pay tax at normal GST rates for transactions under the Reverse Charge Mechanism and no benefit of flat rate is available to them as well. If a taxpayer has multiple segments of businesses under the same PAN, then all the segments have to collectively opt for or opt-out of the composition scheme compulsorily. Segment wise composition option is not allowed under GST.

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A taxpayer (dealer) whose turnover is not more than  Rs . 1.5 crore 1  can opt for the Composition Scheme (Levy). But In case of North-Eastern states and Himachal Pradesh, the limit is  Rs . 75 lakh 1 . As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019. Further, GST Council in its 32nd meeting proposed an increase to this limit for service providers on 10th Jan 2019*. Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover. 1 . CBIC has notified the increase to the threshold limit from  Rs . 1.0 Crore to  Rs . 1.5 Crore

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(5) List of the states where the limit of Rs.75 lakh is applicable instead of Rs.1.5 crore for opt-in composition scheme.

Arunachal Pradesh Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Uttarakhand

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(6) Whether the taxpayer (dealer) has the option to opt for the composition scheme (levy) during the financial year at any time?

No, the taxpayer (dealer) can opt for the composition scheme (levy) before the beginning of the relevant financial year by intimating through filing Form GST CMP-02.

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(7) The Taxpayers who cannot opt for the Composition Scheme (Levy)?

The following persons are not allowed to opt for the composition scheme (levy): A casual taxable person (i.e. a person who occasionally undertakes supplies in a State or Union Territory where he has no fixed place of business). a non-resident taxable person; (i.e. a person who occasionally undertakes supplies but has no fixed place of business or residence in India.) The taxpayers (dealers) whose aggregate turnover in the preceding financial year have crossed the limit of  Rs . 1.5 Crores or  Rs . 75 lakhs as the case may be; The taxpayer (dealer) who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis; The taxpayers (dealers) of services, other than restaurant service;

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The persons who are supplying goods which are not taxable under the GST law; The taxpayers (dealers) who makes any Inter-State outward supplies of the goods 1 ; Inter-state outward supplies shall also include stock transfer made to the own branches located outside the state because it is also to be considered as a supply under the GST law. 2 The taxpayers (dealers) who makes any supply of goods through an e-commerce operator who is required to collect tax at source (TCS) under section 52; and 1 . There is no direct restrictions on purchase of goods from Inter-State Suppliers by taxpayers (dealers) opting for this scheme. 2 . even the taxpayer registered under composition scheme shall not be eligible to make supplies of goods to special economic zones as such supplies shall be treated as inter-state supply.

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a manufacturer of the following goods: 3 3 . However, the traders and retailers of these products shall be eligible to avail composition scheme (levy). 4 . Inserted vide Notification No. 43/2019-Central Tax, Dated 30th September, 2019 with effect from 1st day of October, 2019.

Sl. No. Classification (Tariff item / Chapter) Description 1 2105 00 00	 Ice Cream and other edible ice, whether or not containing cocoa 2 2106 90 20	 Pan Masala 2A. 4 	 2202 10 10	 Aerated Water 3. 24 Tobacco and manufactured tobacco substitutes

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(8) Which conditions should be fulfilled by taxpayer for availing Composition Scheme (Levy)?

The taxpayer must  fulfill  following conditions for availing composition scheme (levy): No Input Tax Credit can be claimed by a taxpayer (dealer) who is opting for composition scheme. The taxpayer (dealer) cannot supply goods which are not subject to tax under GST (e.g. Petroleum crude, Alcohol for Human Consumption etc.). The taxpayer has to pay tax at normal rates for transactions covered under the Reverse Charge Mechanism. If a taxable person is running business in different segments (such as textile goods, electronic goods, grocery stores, etc.) under same PAN, then he must register all such businesses under the composition scheme collectively or opt out of the scheme.

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The taxpayer has to mention the words “composition taxable person” on every notice or signboard displayed prominently at their place of business and at additional place of business if any. The taxpayer (dealer) has to mention the words “composition taxable person” on every bill of supply issued by him. As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019.

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(9) How can a taxpayer opt for composition scheme?

Regular Provisions: Any registered person who wants to opt for composition levy has to file an electronic intimation in the FORM GST CMP-02 prior to the commencement of financial year for which the option to pay tax under composition levy is exercised and also has to a furnish a statement in FORM GST ITC-03 in accordance with the sub rule (4) of Rule 44 of CGST Rules, 2017, within 90 days from the commencement of the relevant financial year. A person having a single PAN and registered in more than one State under GST can opt for the scheme, provided he meets all the conditions of the scheme, only if all such registered persons opt for the Composition scheme. A registered person cannot choose to opt for the Composition scheme in one state and not in other states. Further, an intimation for withdrawal from the scheme; or denial of the scheme with respect to any one registered person under the same PAN will be applicable for all such registered persons.

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Transitional Provisions: Registration under GST law is compulsory for opting for the Composition scheme. A person who is registered under existing laws and has obtained a provisional registration under GST has to file an electronic intimation in the FORM GST CMP-01 on the common portal (www.gst.gov.in). He can file this intimation either before the appointed day (i.e. day on which GST came into force 01/07/2017) or within 30 days (or as extended by the commissioner) of the appointed day (01/07/2017), (which was later extended up to 16/08/2017). If he intimates after the appointed day, he shall not collect GST and issue bill of supply from the appointed day. Further such person as to furnish a statement containing details of stock including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts for the scheme, in FORM GST CMP-03, within 60 days (or as extended by the commissioner) of the date from which the option for composition levy is exercised. As per Order No.11/2017-GST dated 21.12.2017, the period for intimation of details of stock in FORM GST CMP-03 is extended till 31st January, 2018 A person who is not registered under existing law but applies for fresh registration under Rule 8 of the CGST Rules, 2017 may opt for the scheme by providing necessary information under part B of FORM GST REG-01.

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(10) What is the validity period of the composition scheme?

A person who opts for the composition scheme (levy) can continue to pay tax under the same scheme as long as he satisfies the eligibility criteria and conditions related to the scheme and do not require to file a fresh application every year. However, such a person shall be liable to pay tax under sub-section (1) of section 9 of the CGST Act, 2017 from the day he ceases to satisfy any of the conditions and shall issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme.

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(11) Which are the consequences will have where the taxpayer contravenes any provision of law?

In case proper officer observed any contravention where the taxpayer was not eligible to opt for composition scheme or contravened any provisions of the CGST Act, 2017 or Chapter II of the CGST rules, 2017, then he may issue a notice to such taxpayer in Form GST CMP-05 to show cause within 15 Days of the receipt of such notice as to why the option to pay tax under the composition scheme shall not be denied. On receipt of the reply in relation to the notice issued in Form GST CMP-06, the proper officer may issue an order in Form GST CMP-07 within period of 30 days of the receipt of the reply from the taxpayer either may accept the reply or deny the option to pay tax under the composition scheme from the date of the taxpayer contravenes the provision. In case, the taxpayer who was ineligible to opt for the scheme had opted for the same, then, in addition to tax payable by him as per normal provisions, he shall also be liable to pay a penalty u/s 73 (SCN & Demand Order in  Bonafide  Cases) or 74 (SCN & Demand Order in  Malafide  Cases) of the Act. In case, the proper officer may deny the option to pay tax under composition scheme, the taxpayer can avail input tax credit in respect of stock lying after denial by filing a statement in Form GST ITC-01 within a period of 30 days rom the date of cancellation order issued by the proper officer.

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(12) Whether taxpayers registered under composition scheme shall issue a tax invoice or bill of supply under GST?

The Taxpayers (dealers) shall issue a bill of supply.

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(13) How to calculate the Aggregate Turnover as per section 2(6) of the CGST Act, 2017 under Composition Scheme?

Aggregate turnover for the purpose of composition scheme will be determined on the basis of turnover on an all India level and include value of all taxable supplies, exempt supplies and exports made under the same PAN, but it would exclude inward supplies under reverse charge as well as its Central, State / Union Territory and Integrated taxes and cess. As per CBEC Order No. 01/2017-Central Tax dated 13th October, 2017 has clarified that: a) a person supplying any exempt services including services by a way of extending deposits, loans & advances in so far, the consideration is represented by either a way of interest or discount shall not be ineligible for the composition scheme. (Explanation 1 to Section 10 of CGST Act, 2017 inserted vide Finance (No. 2) Act, 2019). b) In determining the aggregate turnover in order to determine his eligibility for composition scheme, value of supply of the exempt services including services by a way of extending deposits, loans or advances shall not be considered.

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(14) Which are the defined GST rates for a composition taxpayer (dealer)?

Sr. No. Eligible Taxpayers Rate of Tax 1. Manufacturers 1% (0.5% CGST + 0.5% SGST) of the turnover earlier the rate is 2% as per Notification No. 01/2018 dated 1st Jan, 2018 2. Restaurant Services 5% (2.5% CGST + 2.5% SGST) of the turnover 3. Any other supplier eligible for composition levy 1% (0.5% CGST + 0.5% SGST) of the turnover 4. Goods & Services (As composite supply) 1% (0.5% CGST + 0.5% SGST) of the turnover *Provided that turnover of services doesn’t exceeds 10% of total turnover in previous year or  Rs . 5 Lacs, whichever is higher. 5. Goods or Services (As mixed supplies) 6% (3% CGST + 3% SGST) of the turnover *This is as per Notification No. 2/2019 – Central tax (Rate), dated 7th March, 2019 – Presumptive Scheme under GST *Applicable from 1st April, 2019

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(15) How should GST payment be made by a composition dealer?

The Taxpayer (dealer) shall have to pay tax on quarterly basis before the 18th day of the month succeeding the quarter during which the supplies were made by submitting Form CMP-08. Composition taxpayers are not allowed to take input tax credit hence they should make payment of tax by debiting cash ledger only.

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(16) Which returns are required to be filed by a composition taxpayer (dealer)?

Form CMP-08 In April 2019, Form GST CMP-08 has been introduced so that it can be used for filing it from the beginning of financial year 2019-20. Form CMP-08 replaces the Form GSTR-4 that was earlier required to filed by the composition taxpayers (dealers). Form CMP-08 is a statement cum challan which requires to give summary information about self assessed taxes payable for a given period of return. The Taxpayer (dealer) shall have to file electronically quarterly returns in Form CMP-08 by the 18th day of the month succeeding the quarter. Due dates for filing Form GST CMP-08 are as follows: Apr-Jun: 18th July Jul-Sep: 18th Oct Oct-Dec: 18th Jan Jan-Mar: 18th Apr

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GSTR-4 From financial year 2019-20 GSTR-4 is replaced by the CMP-08, earlier GSTR-4 is quarterly return but now it has to be filed once in a financial year. Form GSTR-4 shall contain details of purchases/ inward supplies as well as sales/ outward supplies ( i ) Purchases/ Inward Supplies – the supplies made by the registered person to such composition supplier is auto-populated from GSTR-1 of the registered supplier to the composition supplier in Form GSTR-4A. 	       The taxpayer shall accept, delete, or modify the information in from GSTR-4A and accordingly disclose it in 			GSTR-4. (ii) Sales/ Outward Supplies – As recipient is not entitled to any input tax credit on purchases made from the composition taxpayer (dealer), the consolidated detail of sales/ outward supply is required to file in the GSTR-4 accordingly. GSTR-4 is to filed by 30th April of the succeeding year. Penalty for late filing GSTR-4 shall be  Rs . 100 per day or maximum  Rs . 5,000 in respect of CGST & SGST respectively whichever is lower is payable.

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Form GSTR-9A (Annual Return): The Form GSTR-9A is annual return which must be filed by the taxpayers who have opted for the composition scheme once a year for the financial year or part thereof. Form GSTR-9A also can be used to reflect any additional tax liability which is not disclosed in Form GSTR-4. Late Fees to be paid in case of taxpayer is not submitting the Form GSTR-9A (annual return) within the due date as prescribed in the GST law of  Rs . 100 for every day of delay subject to maximum amount of late fees as calculated at 0.25% of his turnover in a State/UT.

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(17) Which other conditions are applicable to the taxpayer (dealer) opting for composition scheme (levy)?

As per Section 10 of the CGST Act, 2017, the taxpayer (dealer) who opts for the composition scheme shall be required to follow other conditions apart from the above as follows: – ( i ) Taxpayer (dealer) shall mention “composition taxable person, not eligible to collect tax on supplies” on the top of bill of supply issued by him; and (ii) they shall mention “composition taxable person” on every notice or signboard displayed at the principal place of business and at additional places of business if any.

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Composition Scheme - Youtube-Final

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Composition Scheme - Youtube-Final

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