Composition Scheme GST detailed view.

Composition Scheme GST detailed view.

Composition Scheme GST

We have known the facts about the taxes, filing of returns, maintaining records, invoices and others documents. They are awesomely maintained by a large businesses but what about small businesses and SMEs?
To come over this flaw of small businesses a composition scheme was introduced. These scheme holds for different VAT registered for different states. And now we have a composition scheme for GST too. It contains an option for a registered taxable person having turnover less than the limit to pay tax at a lower rate with few specified conditions.

Upon registration of taxpayer under this scheme, he has to specify his need to come under this scheme. If he fails to verify his being under this scheme, then he will be treated as a normal tax payer only.
There is a particular turnover and rate to be under this scheme that is a registered payer having aggregate below Rs. 75 lakh in the preceding financial year pay tax at a rate not less than 5% for restaurants, 2% for a manufacturer and 1% for traders.
But this scheme is valid only for the person who supplies goods. Person who supplies services is not eligible to get registered under this scheme. Even in the supply of goods there are few conditions who are not eligible to get registered under this scheme. they are:


  • Inter-state transactions, Import, Export.


  • Supply of goods via electronic Commerce Operator i.e., E commerce and liable to collect taxes


  • Goods which are not under tax payable.


  • Different business segments having same PAN as held by the taxable person, he must register all such businesses under the scheme.


GST gives big relief to small traders/Manufacturers/restaurants:

  • In service sector, Composition Scheme is available only for one sector – restaurants.


  • In case of certain industries such as ice-cream making, the composition scheme may not be available.  


  • Small taxpayers are not required to give HSN code in their returns.


  • Reduce compliance burden.


  • Special dispensation for job-work to help job worker in GST regime.


  • This limit is Rs. 10Lakh for 11 States namely Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand, Himachal Pradesh and Jammu & Kashmir.


Few Facts about Composition Scheme are:

  • A composition scheme GST dealer is not necessary to maintain detailed record of his/her transactions
  • He is not allowed to avail input tax credit of GST which is paid to supplier
  • A dealer under this scheme cannot issue a tax invoice as well. A buyer from composition dealer will not be able to claim input tax on such goods.
  • If by any chance composition dealer has proved to be wrong under this scheme then, such a person shall be liable to pay all the taxes which he would have paid under the normal scheme. Also, he will be paying a penalty equivalent to an amount of tax payable.This penalty will not be levied without giving a show cause notice to the dealer.



Advantages under this Composition Scheme GST are:

  • A normal tax payer has to pay 37  returns to government with all the detailed records to be showed where as a tax payer under composition scheme has to pay quarterly without even maintaining the records.


  • Also the benefit of tax liability lies with him, He doesn’t have to pay more than 1% for manufacturer, 2.5% for restaurant sector and 0.5% for other traders of turnover.


  • output liability will be nominal and he does not need to bother about return filing by his supplier. But normal tax payer doesn’t have this advantage, he has to pay tax at the standard rate.


  • With all the above benefits he has an awesome competitive edge too.





2 Responses

  1. Jain dinesh says:

    Sir, Maine gst registration from aug’17 Lagu Kiya. Abhi sept’17 ko return filing ko Mera consultant kI pas detail diya tho unone Bola Mera composition scheme registerd hai. But job work billing karke (18%) Mera customer company diya aur unone uska muthbik payment bhi release Kiya. Abhi cmp- 4 form online nahi chalu hai. Now give me suggestions. Kya Mera registration change hoga aur tax payment parly ko reverse hoga?

    • automaxis says:

      Dear Dineshji,

      The window for the composition scheme will open after October, as its a quarterly filing process. I case you want to transfer from composition to regular dealer, you can click here

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