GST Composition Scheme-Turnover Limit

GST Composition Scheme was designed to reduce the GST compliance burden for micro, small and medium enterprises (MSMEs). To enrol, the taxable person under GST must have an aggregate turnover of less than Rs.75 lakhs per financial year, in most cases. In this article, we look at the turnover limit for GST composition scheme in detail.

Turnover Limit Increased to Rs.75 Lakhs

The Ministry of Finance (MoF), Initially introduced the GST Composition Levy Scheme with a turnover limit of Rs.50 lakh. However, due to various representations, in the GST Council meeting held on 11th June 2017, the turnover limit for Composition Levy increased its limit from Rs.50 lakh to Rs.75 lakh for all eligible registered persons. Though the turnover limit was increased to Rs.75 lakhs for majority of the States, a few States as under have different turnover limits. Further, the GST Council also recommended that in case of Uttarakhand, the turnover limit for Composition Levy for CGST and SGST purposes will be Rs.75 lakh.

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Turnover Limit of Rs.50 Lakhs for the Special Category States

The GST Council has decided that following special category states will have a Rs.50 lakhs turnover limit for Composition Levy for CGST and SGST purposes.

Arunachal Pradesh
Assam
Manipur
Meghalaya
Mizoram
Nagaland
Sikkim
Tripura
Himachal Pradesh.

For the State of Jammu & Kashmir the turnover limit for the Composition levy has not yet been decided and will be decided in due course.

Manufacturers NOT Eligible for GST Composition Scheme

The following manufacturers will not be eligible for the Scheme:

Ice cream and other edible ice, whether or not containing cocoa
Pan masala
Tobacco and manufactured tobacco substitutes

Rate of Tax under GST Composition Scheme

The GST rate of tax for those registered under the Scheme is as follows:

Manufacturers, other than manufacturers of such goods as may be notified by the Government - 1%
Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II - 2.5%
Any other supplier eligible for composition levy under section 10 and these rules - 0.5%

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Frequently Asked Questions

Common questions about GST Composition Scheme Turnover Limit for MSMEs.

A: The GST Composition Scheme is designed for micro, small, and medium enterprises (MSMEs) with an aggregate annual turnover below Rs.75 lakhs (in most cases). Manufacturers of ice cream, pan masala, tobacco, and tobacco substitutes are not eligible for this scheme.

A: The primary benefit of the GST Composition Scheme is that it reduces the compliance burden for small businesses by allowing them to pay a fixed tax rate instead of the regular GST rates. This simplifies the tax filing process and recordkeeping requirements.

A: The tax rates under the GST Composition Scheme are as follows: 1% for manufacturers (except those excluded), 2.5% for suppliers of services, and 0.5% for other eligible suppliers.

A: While the general turnover limit for the GST Composition Scheme is Rs.75 lakhs, some special category states like Arunachal Pradesh, Assam, Manipur, and others have a lower turnover limit of Rs.50 lakhs for this scheme.

A: To enroll in the GST Composition Scheme, a business must meet the eligibility criteria and apply for registration under the scheme. The application can be made online through the GST portal or offline by submitting the necessary documents to the concerned authorities.

A: Yes, businesses can opt out of the GST Composition Scheme at any time. However, they will then be required to pay regular GST rates and comply with the standard filing and recordkeeping requirements.

A: No, there is no specific limit on the number of businesses that can enroll in the GST Composition Scheme as long as they meet the eligibility criteria, which primarily revolves around the annual turnover limit.

A: Yes, businesses enrolled in the GST Composition Scheme can provide services across multiple states. However, they must comply with the specific turnover limits and other eligibility criteria applicable in each state.

A: Businesses enrolled in the GST Composition Scheme are required to file quarterly returns, which simplifies the compliance process compared to regular GST filings.

A: No, businesses enrolled in the GST Composition Scheme are not eligible to claim input tax credit (ITC) on their purchases. This is one of the trade-offs for the reduced tax rates and simplified compliance requirements under the scheme.