Background of the composition scheme under GST

Section 10 of the CGST Act, 2017 has provided an alternative method for the small taxpayers to simplify the compliances, pay GST at a fixed rate of turnover and reduce the compliance cost, unlike the normal taxpayers.This scheme is only for the small taxpayers whose aggregate turnover is up to Rs. 1.5 Crores or Rs. 75 Lakhs for the special category states. This scheme can be opt-in or opt-out at the option of an eligible taxable person. The taxpayers who are opt-in for this scheme shall pay GST tax at a prescribed percentage of turnover every quarter instead of paying tax every month at the rates prescribed for normal taxpayers.

The eligibility of the composition scheme under GST:

Description Turnover of the state
Other than special category states Less than 1.5 Crores
Special category states Less than 75 Lakhs

What are the objects of the composition scheme under GST?

The following are the objects or intentions of the Government of India to introduce the composition scheme:

  • Reduce the compliance burden of the small taxpayers
  • Compliance cost reduction for such taxpayers opting composition scheme
  • Ensure proper tax collection to the government without having to trouble the small taxpayers with additional compliances
  • To bring simplicity to the tax regime

What are the special category states under the composition scheme?

The following are the special category states where the applicable turnover limit is Rs. 75 Lakhs

  • Arunachal Pradesh
  • Manipur
  • Meghalaya
  • Mizoram
  • Nagaland
  • Sikkim
  • Tripura
  • Uttarakhand

What are the compliances for the composition taxpayers?

Composition taxpayers are required to file a quarterly tax return with details of the turnover and tax by the 18th of the month after the end of the quarter. The composition taxpayers only need to file GSTR-4 annually by 30th April of next financial year. Also, GSTR-9A is an annual return that must be submitted by 31st December of the next financial year.

The compliance for the composition taxpayers:

Return form Description of the return Frequency of the return Due dates of the return
Form CMP-08 Details of turnover & payment of tax Quarterly 18th of the month after the end of the quarter
Form GSTR-4 Details of turnover and tax paid challan details of all quarters Yearly 30th April of the next financial year
Form GSTR-9A Details of CMP 08 & GSTR 4 Yearly 31st December of the next financial year

What are the notified goods which cannot be manufactured as per the composition scheme?

Tariff item, subheading, heading, or chapter Description
2105 00 00 Ice cream and other edible ice, whether or not containing cocoa
2106 90 20 Pan masala
2202 10 10 Aerated water
24 Tobacco and manufactured tobacco substitutes