GST Composition Scheme

GST Composition Scheme

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GST Composition Scheme

Composition Scheme is a simple scheme and an alternative method of 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 meant for small taxpayers those who are supplying goods and services or both to the end consumer with low turnover. This composition scheme has been designed with the aim to make compliance more accessible and cost-effective for the taxpayers. In this article, we look at the composition levy scheme in detail.

Eligibility Criteria

Any existing taxpayer whose annual turnover did not cross Rs 1.5 crore threshold or Rs.75 lakhs in the preceding financial year.

Special Eligibility

In the case of states under special category, except Jammu & Kashmir and Uttarakhand, the limit of annual turnover is increased from Rs. 50 lakhs to Rs. 75 lakhs. While the turnover threshold for Jammu & Kashmir and Uttarakhand will be Rs. 1 crore must register under the GST composition scheme.

Conditions for Availing Composition Scheme

The below following conditions must be satisfied to avail this composition levy 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 textile, 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.
  • 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 provide services of up to Rs. 5 lakh,

Composition Scheme Rules under GST – Compliance

The submission of various forms under the Composition Scheme Rules is meant for specific reasons. The list of forms under Composition Scheme Rules with the purposes and due dates are tabulated below for the reference.

S.No. Forms to be Filed Description Due Date
1. Form GST CMP 01 For intimation of willingness to opt for the scheme Within 30 days
2. Form GST CMP 02 For information pertaining to stock and inward supplies from unregistered individuals Prior to the commencement of the Financial year
3. Form GST CMP 03 For intimation of withdrawal from the scheme Within 60 days of the exercise of an option
4. Form GST CMP 04 For show cause notice on contravention of the Act or rules by proper officer Within 7 days of the occurrence of the event
5. Form GST CMP 05 For the reply to show cause notice On contravention
6. Form GST CMP 06 For an issue of order Within 15 days
7. Form GST CMP 07 For registration under the Composition Scheme Within 30 days
8. Form GST REG 01 For information of inputs in stocks, finished or semi-finished goods Prior to the appointed date
9. Form GST ITC 01 For intimation of ITC available Within 30 days of option withdrawn
10. Form GST ITC 13 For intimation of willingness to opt for the scheme Within 60 days of commencement of the Financial year

Validity of Composition Levy

The validity of composition scheme will depend upon the option exercised by a taxable person to pay tax remain valid so long as all the conditions are fulfilled as specified in the law. However, individuals who are eligible for the scheme can choose to opt out of it by simply filing an application.

Online Application Procedure for GST Composition Levy

The taxpayers must follow the below steps to Opt for the Composition Levy on the GST Portal.

Visit GST Portal

Step 1: Firstly, the taxpayers have to visit the Goods and Services Tax portal to Opt for the Composition Levy online.

Step 1 - GST Composition Levy Scheme
Step 1 – GST Composition Levy Scheme

Step 2: You have to click on the New Registration under the services tab that is visible on the home page. The following application procedure is of two parts:

  1. New Registration
  2. Temporary Reference Number (TRN)

New Registration

Step 3: By clicking on the New Registration radio button, the new registration page is displayed.

Step 3 - GST Composition Levy Scheme
Step 3 – GST Composition Levy Scheme
  • Then you have to select the taxpayer type from the dropdown list.
  • Select the state and district for which the registration is required
  • Enter the legal business/ entity name as mentioned in the PAN database.
  • Enter the PAN of the Proprietor or PAN of your business.
  • Enter the email address and valid mobile number of the Primary Authorized Signatory.
  • An OTP will be sent to you for the verification of your mobile number and email address.
  • Enter the OTP and captcha given. Then click on the Proceed button.

Login into Portal

Step 4: Click on the ‘Login’ button to access the username and password page.

Step 4 - GST Composition Levy Scheme
Step 4 – GST Composition Levy Scheme

Step 5: Enter the correct ‘Username’ and ‘Password’ credentials along with the captcha in the required field and click ‘login’.

Application to Opt for Composition Levy

Step 6: After you logged in, you have to select ‘Application to Opt for Composition Levy’ from the Registration Menu under the service tab that is visible on the home page.

Step 6 - GST Composition Levy Scheme
Step 6 – GST Composition Levy Scheme

Step 7: You will be redirected to the new page, where the Application to Opt for Composition Levy page will be displayed with the following details:

  • GSTIN
  • Legal Name of Business
  • Trade Name (if any)
  • Address of Principal Place of Business
Step 7 - GST Composition Levy Scheme
Step 7 – GST Composition Levy Scheme

Step 8:  Below these details, your Nature of business and Jurisdiction will be listed as shown below:

Step 8 - GST Composition Levy Scheme
Step 8 – GST Composition Levy Scheme

Step 9: There will be Composition Declaration below these details that you must check to pledge to abide by the rules and conditions for the Taxpayers who are under the Composition Levy.

Step 9 - GST Composition Levy Scheme
Step 9 – GST Composition Levy Scheme

Verification Process

Step 10: Before submitting the application, you must also check the box for the Verification process (below the Composition Declaration) that states that all the information given is true and that nothing has been concealed from the authority.

Step 10 - GST Composition Levy Scheme
Step 10 – GST Composition Levy Scheme

Step 11: Finally, you have to select the Authorized Signatory from the drop-down menu.

Step 12: You have to enter the place where the application is filed, in the Place field.

Step 13: You can also click the ‘save’ button to save the application form and retrieve it later.

Step 13 - GST Composition Levy Scheme
Step 13 – GST Composition Levy Scheme

Submit the Application

Step 14: Once you select the Authorized Signatory and the Place, only then the options to submit the form will get activated.

Step 15: Sign the form by using either your Digital Signature Certificate (DSC) or the EVC option. On selecting any of these below options, you will receive an OTP.

Using DSC Option

Step 16: If using a DSC, you will be required to select the registered DSC from the emSigner pop-up screen and then proceed from there accordingly.

Using EVC Option

Step 17: Enter the OTP that you have received and then click on the Validate OTP button.

Step 18: You will get a prompt to confirm your action, click on Proceed to move forward.

Step 18 - GST Composition Levy Scheme
Step 18 – GST Composition Levy Scheme

Digital Signature Signer

Step 19: The system will retrieve the installed digital signatures available using the emSigner, and you will get a pop-up message to select the desired DSC. You have to select the desired signature to receive the confirmation message.

Step 19 - GST Composition Levy Scheme
Step 19 – GST Composition Levy Scheme

Acknowledgement Message

Step 20: On successfully filing the application for cancellation of registration, the system will generate the ARN and display a confirmation message.

Step 21: GST Portal will also send a confirmation message on your registered mobile phone number and e-mail-ID.

Step 22: On successfully filing the application to Opt for the Composition Levy, the system will generate the ARN for the work item will be generated and sent to you via e-mail and SMS within the next 15 minutes.

Step 22 - GST Composition Levy Scheme
Step 22 – GST Composition Levy Scheme

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