Composition Scheme Under GST: Rules, Limit & Date

Tally Solutions |Updated on: August 24, 2021

GST Composition Scheme Rules
Opting for GST Composition Scheme

- For persons already registered under the pre-GST regime
- For persons who applied for fresh registration under GST
- For persons who registered as Regular Dealers under GST and switching to GST Composition Scheme
Effective Date to pay tax under the GST Composition Scheme
GST Composition Scheme Eligibility
GST Composition Rules
GST Composition Return Forms

GST Composition Scheme Rules

Composition Scheme under GST is a scheme which offers comparatively lesser compliance activity, as well as a flat rate GST tax rate for small businesses. Thus, it is important for businesses to be clear about, what is the composition scheme under GST.

Opting for GST Composition Scheme

For individuals already registered under the pre-GST regime

Any person being granted registration on a provisional basis (registered under VAT Act, Service Tax, Central Excise laws etc) and who opts for Composition Levy shall electronically file an intimation in FORM GST CMP-01, duly signed, before or within 30 days of the appointed date. If intimation is filed after the appointed day, the registered person:

a) Will not collect taxes

b) Issue bill of supply for supplies

FORM GST CMP- 03* must also be filed within 60 days of the exercise of option:

a) Details of stock

b) Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of an option

For individuals who applied for fresh registration under GST

For fresh registrations under the GST Composition Scheme, an intimation in Form GST REG- 01 must be filed.

For individuals who registered as Regular Dealers under GST and switching to GST Composition Scheme

Every person who registered under GST as a regular dealer, but then opted to pay taxes under the GST Composition Scheme, must provide an intimation in Form GST CMP – 02, communicating his wish to exercise this option, and also, furnish a statement in Form GST ITC-3, containing details of ITC relating to inputs lying in stock, inputs contained in semi-finished or finished goods - within 60 days of commencement of the relevant financial year. However, as per the latest updates, Form GST ITC-03 must be submitted within 90 days from the date of start of the GST composition levy. Also, it is essential to file GST TRAN-1 before Form GST ITC-03 is furnished.

Alternatively, in case a dealer wants to move from composition to regular, he needs to:

File an intimation in Form GST CMP-04
Furnish stock statement in Form GST ITC-01

Latest Update!

7th March 2019

The CBIC has issued a notification increasing the upper limit of annual aggregate turnover (for the previous financial year) to opt into the composition scheme from Rs 1 crore to Rs 1.5 crores. However, the limit remains Rs 75 lakhs for N.E states & Uttarakhand!

The notification comes into effect from 1st April 2019.

Attention GST registered taxpayers! 31st March 2019 is the deadline to opt into Composition for FY 2019-20

For: Any GST registered taxpayer who want to opt for the Composition scheme for FY 2019-20;

31st March 2019 is the deadline to file the intimation in Form GST CMP-02 to opt into composition scheme for the FY 2019-20.

Also, furnish a statement in form ITC-03 within 60 days of commencement of the FY 2019-20 to declare the ITC claim that has to be reversed on inputs/capital goods in stock, in semi-finished or in finished goods.

Effective date to pay tax under the GST composition scheme

The option to pay tax under the GST Composition Scheme shall be effective as follows:

For persons already registered under pre-GST regime: Appointed day i.e. 1st July 2017
For persons who applied for fresh registration under GST: Date of grant of registration
For persons who registered as Regular Dealers under GST and switching to GST Composition Scheme:
The GST composition scheme will be applicable from the 1st day of the next month
If the registered person opts to pay tax under GST composition scheme effect from the first day of a month which is not the first month of a quarter, then he will file Form GSTR-4 return for that quarter. For previous quarters i.e. before GST composition scheme, he must file the normal returns

GST Composition Scheme Eligibility

The following taxable persons cannot opt for the composition scheme under GST:

Taxpayer supplying Exempt 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

GST Composition Rules

A business will need to comply with the following GST composition rules:

No Input Tax Credit can be claimed
No Inter-state supply of goods can be done
No GST exempted goods can be supplied
Tax needs to be paid at normal GST rates for transactions under the Reverse Charge Mechanism
If a taxable person has multiple segments of businesses under the same PAN, they must all collectively opt for or opt-out of the composition scheme
The words 'composition taxable person' must be displayed prominently on every notice or signboard at the place of business
As per the GST composition scheme bill format, the words 'composition taxable person' must be displayed prominently on every bill of supply which is issued
Services worth up to INR 5 Lakh can be supplied under the scheme, by a taxable person who is also supplying goods

GST Composition Return Forms

A GST composition scheme dealer is required to file a quarterly composition return form i.e. Form GSTR-4 by the 18th of the month after the end of the quarter. Also, an annual composition return form i.e. Form GSTR-9A has to be filed by the 31st of December of the next financial year. All these forms must be duly signed and filed electronically on Common Portal, either directly or through a Facilitation Centre notified by the Commissioner. As per the latest notifications, the late fees for failure to furnish returns in Form GSTR-4 by the composition scheme last date have been waived off to the extent of the amount in excess INR 50 per day for every day the failure continues. In case of the filing of NIL Returns in Form GSTR-4, the late fees for failure to furnish return by the composition scheme last date, have been waived off to the extent of the amount in excess of INR 20 per day for every day the failure continues.

Know more about GST Composition Scheme

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