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Composition Scheme Under GST

The Composition Scheme under GST is designed to ease compliance for small taxpayers by allowing them to pay lower tax rates, but it does not permit input tax credit. Eligible taxpayers include those with an aggregate turnover not exceeding Rs. 1.5 crore (or Rs. 75 lakh for special category states) and certain conditions apply. However, specific businesses, such as manufacturers of certain goods and those making inter-state supplies, are excluded from this scheme.

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66 views3 pages

Composition Scheme Under GST

The Composition Scheme under GST is designed to ease compliance for small taxpayers by allowing them to pay lower tax rates, but it does not permit input tax credit. Eligible taxpayers include those with an aggregate turnover not exceeding Rs. 1.5 crore (or Rs. 75 lakh for special category states) and certain conditions apply. However, specific businesses, such as manufacturers of certain goods and those making inter-state supplies, are excluded from this scheme.

Uploaded by

kamalimurugan056
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Composition Scheme under GST

Introduction:
Compliance to GST involves cost and paper work, which is difficult for the small tax paper
due to limited availability of resources and expertise. In order to provide relief to the small
taxpayers the composite scheme has introduced. As per the GST law, generally a taxpayer pays
tax under normal rates i.e 5%, 12%, 18%, 28%. However under the composite scheme lesser
tax rate will be levied. The major disadvantage of this scheme is that NO INPUT TAX
CREDIT is allowed to the Composition Supplier

GST Rates Under Composition Scheme


Particulars CGST SGST Total
Manufacturers and Traders 0.5% 0.5% 1%
Restaurants not serving alcohol 2.5% 2.5% 5%
All other Services 3% 3% 6%

Conditions to opt for the Composition scheme


1. A registered person who have got registered other than special category of states say
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura, Uttarkand and Himachal Pradesh and whose Aggregate Turnover in the
preceding financial year doesn’t exceeds Rs. 1.5 crore are only eligible under this
scheme. If the person engaged in the business of services then the value of the supply
should not exceed Rs.10% of the total turnover or Rs.5,00,000 whichever is higher.

Note:
Aggregate turnover includes
a) All intra state supply of goods and services
b) Value of export of goods and services
c) Exempted supply of goods and services which attracts 0%
d) Non taxable supply of goods

2. If a person registered under the special category of states say states say Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Uttarkand and Himachal Pradesh and whose Aggregate Turnover in the preceding
financial year doesn’t exceeds Rs. 75 laksh are only eligible under this scheme. If the
person engaged in the business of services then the value of the supply should not
exceed Rs.10% of the total turnover or Rs.5,00,000 whichever is higher.
3. No input tax credit can be claimed by the person who opt for composition scheme.

4. In each bill and sign board of the business entity - the small payer have to mention “
Composition tax payer”

Example : 1

Example : 2

The following persons are not eligible to opt into the composition scheme:
1. Manufacturers of ice cream, pan masala, or tobacco,
2. A person making inter-state supplies
3. A casual taxable person
4. A non-resident taxable person
5. A person engaged in the supply of non-taxable goods under the GST law
6. A supplier who has exceeded the turnover threshold limit specified for opting into the
composition scheme, and
7. Businesses which supply goods through an e-commerce operator.

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