Composition scheme FAQs

Goods and Service Tax composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross ₹ 1.5 Crores. In the case of 9 special category States, this limit is ₹ 75 Lakhs in the preceding financial year, namely [ Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh. ]

However, if a taxable person is a manufacturer of ice-cream, pan masala or tobacco or tobacco products or if he is a service provider for services other than a restaurant, then such taxable person is not eligible for composition scheme.

Composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to ₹ 1.5 crores (Seventy-five rupees lakhs for special category States, excluding Jammu & Kashmir and Uttarakhand). It is a kind of turnover tax.

The prime motive of the scheme is to provide a simplified tax payment regime for the small taxpayers. It is optional and is mainly for small traders, manufacturers and restaurants.

Any dealer who opts for Composition Scheme under CGST Act is known as a Composite dealer.

The option to pay tax on turnover exercised by a registered person under the composition scheme shall remain valid so long as he satisfies all the conditions specified in the law. The option is not required to be renewed.

It is the only a mode of collection of CGST/SGST or IGST on Supplies of goods and services where the service receiver (may be wholly or partially) will be liable to pay CGST/SGST or IGST to the Government.

GST Composition scheme and Reverse charge mechanism :

Any taxable person opting for a composition scheme will be required to pay tax on supplies taxable under RCM at regular rates and not the composition rate.

GSTR4 may be referred to as details required to be filled in the return. It is a very simple return containing consolidated details of outward supplies, details of import of services or other supplies attracting reverse charge and inward supplies which shall be auto-populated.