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The formulation of the word ‘composition’ comes from the Latin componere, meaning "put together". It is a feature of tax law system in order to provide a comfort to assessee from complying with the necessity of paying tax on value addition by maintaining detail of ‘inputs’ and ‘outputs’, an alternate is provided to go for a put together scheme.
The GST law provides the option of availing the benefit of Composition Levy to small businesses. The objective of composition scheme is to bring lucidity or clarity for small businesses in understanding about the tax laws and to reduce the compliance cost for the small taxpayers.
Moreover, it is optional and the person opting to pay tax under this scheme can pay tax at a prescribed percentage of his proceeds or turnover every quarter, instead of paying tax at normal rate.
An eligible taxable person can be called as a composition dealer under GST if he works under following restrictions :
The conditions and restrictions for composition levy to be called as GST composition rules laid under CGST rules, 2017 are as follows :
The Provisions in the CGST Act says GST composition limit to be a threshold limit which again reverts back to the definition of “Aggregate turnover” which determines the eligibility of taxable person opting composition scheme GST.
The ‘aggregate turnover’ as defined in GST law is the aggregate value of all:
of persons having the same Permanent Account Number to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
The CGST Act portrays that a taxpayer whose turnover is below Rs 1.5 crore* can opt for Composition Scheme (In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh) if he satisfy following conditions:
Above provision makes it clear that supplier of services other than restaurant related services can not opt for Composition Scheme under GST.
Know more about GST Composition Scheme
GST Composition Scheme, GST Composition Scheme Rules, GST Composite Supply, Mixed Supply & Composite Supply under GST, Composite Dealer under GST, Composition Scheme Tax Rates, How to Switch to Composition Scheme
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