GST Composition Scheme: Who Can Opt, The Rates Applicable And More

Are you a trader, manufacturer or restaurant owner? Under GST or goods and services tax, the new indirect tax regime, you are not required to register or pay tax if your annual turnover is below Rs 20 lakh. This has been said by the Central Board of Excise and Customs on multiple platforms. This limit is Rs 10 lakh for Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand and Himachal Pradesh, the CBEC clarified. It also shed light on use of Composition Scheme in case of restaurants/small traders/manufacturers. But what is Composition Scheme and who can make use of it?

The composition levy is an alternative method of levy of tax designed for small taxpayers with turnover is up to Rs 75 lakh. It enables taxpayers to make payments at a flat rate under GST, without input credits. An alternate upper limit of Rs 50 lakh is applicable in a few states - Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh.

The objective of the optional Composition Scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Eligible persons opting to pay tax under this scheme can pay tax at a prescribed percentage of the turnover every quarter, instead of paying tax at normal rate, the CBEC has said earlier.

In the service sector, Composition Scheme is available only for one sector - restaurants. The Composition Scheme is not available for manufacturers of tobacco and manufactured tobacco substitutes, pan-masala and ice-cream and other edible ice, whether or not containing cocoa.

A person opting for composition levy will have to pay tax on quarterly basis before 18th of the month succeeding the quarter during which the supplies were made.

The dealers who opt for Composition Scheme have to file only one quarterly return with details of total turnover.

Invoice with details are not necessary, bill of supply will suffice.
 

Manufacturers/Service Provider/Trader whose Annual Turnover is below 20 Lakhs need not pay any GST and need not register #GSTBoostForBiz pic.twitter.com/UUNTd9f7GD

— CBEC (@CBEC_India) July 19, 2017

"Please file your option for Composition Scheme in Form GST CMP-01 or Part B of Form GST REG-01 as applicable, on the GSTN Common Portal at the earliest," said the CBEC, under the purview of the Department of Revenue.

Here are some other things mentioned by the CBEC with regard to small traders, manufacturers and restaurants:

Manufacturers, service providers or traders whose annual turnover is below Rs 20 lakh need not pay any GST and need not register. This limit is Rs 10 lakh for Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand and Himachal Pradesh.

Those with annual turnover up to Rs 75 lakh can opt for composite scheme. The tax rates will be:

GST Rate of Composition
Traders 1%	Manufacturers 2%	Restaurants 5%

Small taxpayers are not required to give HSN (Harmonized System of Nomenclature) code in their returns.

However, in this option, no input tax credit (ITC) can be taken or passed on.

With online registration, return, payment, refund and other processes, delays and discretions would be reduced.