What is composition scheme in GST? What are the eligibility conditions?

What is composition scheme in GST? What are the eligibility conditions?

GST Composition Scheme

GST Composition Scheme


GST is bringing new rules in the world of tax and in the business compliance of the nation. The large business have the requisite resources and expertise to address these requirements. The medium and the small business and start ups will struggle to comply with these provisions. So to resolve such problems the government have planned to introduce a composition under GST which is a small extension to the current scheme of the VAT law.

When choosing the composition scheme under GST a tax payer will be required to file summarised returns on a quarterly basis, instead of the three monthly returns.
This composition scheme will be followed by business dealing only in goods can only option for scheme. Services providers that have been kept outside the scope of this scheme.
GST will be applicable for almost every assesse in business thus boosting revenues for the government. While purchasing goods or services both CGST and SGST will be lived thereby removing all the confusions. Thus the benefits will be mainly for the large business hence the composition scheme was brought to lower the burden of the small, medium and start up business.
Benefits Under GST composition scheme?
• Less compliance
Under normal GST scheme a tax payer has to file minimum 3 returns monthly and one annual return. But in a composition scheme is only a quarterly return will be uploaded under GSTR4 by: 18th July- 1st quarter, 18th October-2nd quarter, 18th January-3rd quarter, 18th April-4th quarter. Which will ease the compliance burden for the SMES, they can focus more on their business rather than compliance procedures.
• Reduce tax liability
Another benefit of being registered with composition scheme is the rate structure. The rate is 1% for manufacturers, wholesalers 2.5% for restaurant service providers, 0.5% for other suppliers of turnover.
• High liquidity
For the usual taxpayers, most of his working capital will be blocked as input only if his supplier has filled thee return. The supplier has to pay the tax at standard rate and credit of the input will only be availed when supplier files the return.
The eligibility conditions for composition scheme
To get registered under composition scheme is optional and voluntary. Any business which has a turn over less than Rs. 50 lakh can opt for the composition scheme on any given day. There are certain conditions that need to be fulfilled before opting for composition levy.
1. Any assesse who only deals in supply of goods can opt for the composition scheme that means this provision is not applicable for service providers. However, restaurant service providers are excluded.
2. Any dealer who is supplying goods through electronic commerce operator will be barred from being registered under composition scheme.
3. The interstate supply of goods businesses having intra state supply of goods are eligible.
4. It is also levied for all business verticals with the same PAN. A taxable person has the following business like sale of footwear, the sales of mobiles, franchise of McDonald’s.
5. Dealers are not allowed to collect composition tax from the recipient of supplies and neither are they allowed to take input tax credit.
6. If the person is not eligible under composition scheme, tax liability shall be Tax plus interest and penalty which shall be equal to the amount of tax.
7. Dealers who collect tax at source u/s 56.
Following are the people not eligible for composition scheme
• Supplies goods not leviable under the act
• Supplies services
• Makes a supply of goods other than intra state i.e interstate or import and export
• Makes a supply of goods through electronic commerce operator I. E-way e-commerce operator and liable to collect taxes
• Manufacturers such goods as may be notified
Also in case a taxable person has various business segments having same PAN held by the taxable person he has to register such businesses especially under the scheme.
Update your business to GST
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I’m a tax expert with over 10 years of professional experience. I’ve gained practical insights on GST and other Taxes during my tenture as a Tax expert and GST Trainer in Reach Accountant.
  1. Ankit Rastogi 5 years ago

    I need jewellery software

  2. Vyshali 5 years ago

    I need a small clarification and suggestion. In our case the assessee is owing a provisional store whose turnover crosses 20lakhs but surely below 50lakhs. Is he required to raise invoice for each and every transaction?
    Will it be better to opt for composition scheme? If opted for composition scheme what are the invoicing requirements?

  3. AlignBooks 5 years ago

    You put great information about ERP Accounting Software, GST, Finance Management and financial reporting.
    Business oriented people will connect us regarding cloud-based bookkeeping software and GST ready business accounting software for small and medium enterprises.

    Thank for sharing.


  4. Pankaj Suthar 5 years ago

    Can be guide me whom opt composition scheme under manufacturing other than such as good may be notified
    please clear other than such goods notified
    can furniture manufacturer opt composition scheme

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