Composition Scheme under GST

 

Composition Scheme under GST

With the threshold for registration under GST being as low as INR 20 lakh, a large number of small and medium size businesses would now come under the new tax regime. Considering these Organisations may not have the infrastructure and resources to comply with the regular provisions, a Composition Scheme under GST has been introduced.

Let us take a look at the applicability, eligibility criteria, conditions, and other provisions of this scheme.

Who can opt for the Composition Scheme?

  1. Manufacturer
  2. Food and Restaurant Services
  3. Traders

The decision to opt for the Composition Scheme should be made at the beginning of the Financial Year for a person already registered under the GST Law or at the time of applying for registration or within 30 days from the 1st of July, 2017 in case of person migrating from the existing provision.

What is the eligibility criteria to opt for the Composition Scheme?

A person in any of the above categories, whose aggregate turnover did not exceed INR 75 lakhs* in the previous financial year is eligible to opt for this scheme.

Aggregate Turnover = Value of Outward Supplies + Zero Rated Outward Supplies + Exempt Outward Supplies

Aggregate Turnover covers all the supplies effected by a person having the same PAN.

* The threshold limit for opting Composition Scheme in Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh is INR 50 lakhs.

What are the rates of taxes under the Composition Scheme?

Category of Persons Rates of Tax
Manufacturer 2%
Food and Restaurant Services 5%
Traders 1%

Tax is payable on the Turnover of the Person in a State or Union Territory.

Turnover in a State or Union Territory = (Value of Outward Supplies + Zero Rated Outward Supplies + Exempt Outward Supplies)

Illustration

Is the supply of bakery products eligible for Composition Scheme under the Food and Restaurant Services category?

The supply of food and restaurant services category is the only service included under the composition scheme. For a business to be categorised as food and restaurant services, there needs to be an element of service involved. In the case of supply of bakery products, there is only a supply of goods i.e. food items but there is no element of supply of service. Hence supply of bakery products is eligible for composition scheme under the Traders category and not Food and Restaurant Services category.

 

What are the conditions to be complied with, to opt for the Composition Scheme?

The person should not be:

  1. engaged in the supply of services other than the food and restaurant services
  2. engaged in the supply of alcohol liquor for human consumption
  3. engaged in the manufacture of ice-cream, pan masala or other tobacco products and tobacco substitutes
  4. engaged in inter-state outward supply of goods
  5. engaged in making a supply of goods through an ecommerce operator unless the portal is owned by the said person
  6. a casual person or a non-resident person
  7. in possession of stock purchased through interstate trade or transfers or imports on the appointed day
  8. in possession of stock purchased from an unregistered dealer and if he is in possession of such stock, tax under reverse charge mechanism has been paid

What are the other provisions that one needs to keep in mind while opting for the Composition Scheme?

  1. Composition scheme, once opted will apply to all the business verticals of the said person i.e. the option of the scheme will be awarded to all the businesses owned by a person under a single PAN.

 Illustration

Combination of businesses owned by a person under a single PAN Applicability of Composition Scheme
Restaurant, mobile dealership and textile manufacturing unit Yes
Restaurant, supply of mobile through an ecommerce operator No

2. The person shall not collect tax from his customers on the outward supply made by him

3. The person shall not utilise the input tax credit on his inward supplies to pay his output tax liability.

4. The person shall continue to pay taxes at the regular rates for inward supplies under the reverse charge mechanism

How is Input Credit treated at the time of opting for Composition Scheme?

On opting for the Composition Scheme, if the said person has any input credit available, then he shall reverse the amount equal to the input credit on the stock held by him on the immediately preceding day of exercising the option. The stock can be inputs, semi-finished goods, finished goods or capital goods. The remaining value of input credit, if any shall lapse.

In case of a person migrating from the current laws to the Composition Scheme under GST, then again all the input to his credit under the current laws shall lapse.

Can a person who has opted to pay tax under Composition Scheme avail input credit on the inward supply of goods and services?

A person who has opted to pay tax under the Composition Scheme cannot claim input credit on the inward supply of goods and services. The input taxes paid on inward supply of goods and services shall be an additional cost to such person.

What type of an invoice should a person opting for the composition scheme issue on outward supplies made by him?

A person opting for composition scheme shall not issue a tax invoice. He should issue a Bill of Supply and clearly mention “Composition Taxable Person, Not Eligible to Collect Tax on Supplies” on top of the invoice issued by him.

The Bill of Supply must have the following details:

  1. name, address and GSTIN of the supplier,
  2. a consecutive serial number containing only alphabets and/or numerals, unique for a financial year,
  3. date of its issue,
  4. name, address and GSTIN/ Unique ID Number, if registered, of the recipient,
  5. HSN Code of goods or accounting code for services,
  6. description of goods or services,
  7. value of goods or services taking into account discount or abatement, if any, and
  8. signature or digital signature of the supplier or his authorized representative.

It is important to note that, since a person opting for Composition Scheme cannot issue a tax invoice, he breaks the benefit of transfer of input credit down to the end of the value chain.

What are the returns required to be filed under the Composition Scheme?

Form Name Particulars Periodicity Due Date Penalty Provisions
GSTR 4 Details of Outward supplies, debit notes issued, credit notes received, import of goods or services made, invoice wise inter-state and intra-state inward supplies from registered and un-registered dealers. This return should be filed after adding, correcting or changing details, if required in Form GSTR 4A. Quarterly 18th of the Month following the Quarter Any delay in filing of the returns attracts a liability of INR 100 per day subject to a maximum of INR 5,000
GSTR 4A The details of all outward supplies made by a supplier under a regular scheme has to be furnished in Form GSTR1. If a Composition Dealer has availed any goods or services from other Registered Persons, then he will be able to view the details of his input goods or services in Form GSTR 4A. Monthly Between 11th and 15th of every month
GSTR 9A Annual Return Annual 31st of December following the end of the Financial Year for which the Annual Return is being filed Any delay in filing of the returns attracts a liability of INR 100 per day subject to a maximum of an amount calculated at 0.25% on the Turnover in that State or UT

 What are the accounts and records that need to be maintained by a Composition Dealer?

  1. Record of monthly production accounts, showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products
  2. Opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and balance of stock including raw material, finished goods, scrap and wastage thereof
  3. Names and complete addresses of premises where he stores stocks including stocks in transit and stocks stored there in
  4. Names and complete addresses of suppliers to whom he supplies goods or services chargeable to tax
  5. Separate account of advances received, paid and adjustments made thereto
  6. Register of Bill of Supply issued

Click here to try a GST Accounting and Returns Filing tool for free.

What happens if the person under Composition Scheme exceeds the threshold limit of INR 75 lakhs during the Financial Year?

The person shall be immediately liable to pay tax as per the normal rates specified by the GST Law and thereby all the regular provisions of the law will become applicable to him. He will be able to claim input credit on the stock held by him on the immediately preceding day of exercising the option. The stock can be inputs, semi-finished goods, finished goods or capital goods. The date of invoice of the input supplies should not be earlier 1 year from the date preceding the date on which the regular provisions of the law become applicable to him.

Decision making: Composition Scheme vs Regular Tax Levy

We need to understand that the GST Law replaces all the other Indirect Tax statutes in the Country, thereby allowing each supplier to pass on the credit of input tax down the supply chain. This reduces the effect of additional tax burden at each stage from manufacture to trader to the customer and encourages tax levy only on the value addition at each stage.

The thumb rule we could use at the time of making this decision is not to apply for a Composition Scheme if the person is in the middle of the value chain i.e. all the B2B businesses. We could look at opting for the Composition Levy in the case of B2C businesses so far as the benefit of paying tax under the Composition Scheme far outweighs the cost of compliance under the regular scheme and other factors relevant to the business in question.

Illustration 1

Let us take the example of Coir Mats to understand the benefits of remaining under the normal provisions versus composition scheme for the trader under composition levy.

 

Under Composition Scheme   Under the Normal Provisions
Particulars Amount

(INR)

  Particulars

Amount

(INR)

Manufacturer to Trader Manufacturer to Trader
Sale Price 100.0 Sale Price 100.0
GST* @ 5% 5.0 GST* @ 5% 5.0
Total Invoice Value 105.0   Total Invoice Value 105.0
Trader to End User Trader to End User
Cost 105.0 Cost 100.0
Mark up @ 10% 10.5 Mark up @ 10% 10.0
Sale Price 115.5 Sale Price 110.0
Total Invoice Value 115.5 GST* @ 5% 5.5
Tax under Composition Levy @ 1% 1.2 Total Invoice Value 115.5

In this illustration we can see that, a trader, who is in the middle of the value chain is better of remaining under the normal provisions, where his net tax liability is only INR 0.5 (i.e Output Tax of INR 5.5 – Input Tax of INR 5.0). Whereas under the composition scheme his net outflow on taxes would be INR 0.7 (i.e Output Tax of INR 1.2 – Additional profit of INR 0.5).

Now to this let us add the cost of compliance under both the schemes, being INR 1 under normal provisions and INR 0.5 under composition scheme.

Total outflow under the normal provisions is INR 1.5 and under compositions scheme is INR 1.2, making it more beneficial to opt for the composition scheme.

Illustration 2

Let us take the example of Coir Mats again to understand the benefits of remaining under the normal provisions versus composition scheme for the trader under composition levy if the manufacturer is also under the composition scheme.

 

Under Composition Scheme   Under the Normal Provisions
Particulars Amount

(INR)

  Particulars

Amount

(INR)

Manufacturer to Trader Manufacturer to Trader
Sale Price 100.0 Sale Price 100.0
Total Invoice Value 100.0 GST* @ 5% 5.0
Tax under Composition Levy @ 2% 2.0   Total Invoice Value 105.0
Trader to End User Trader to End User
Cost 100.0 Cost 100.0
Mark up @ 10% 10.0 Mark up @ 10% 10.0
Sale Price 110.0 Sale Price 110.0
Total Invoice Value 110.0 GST *@ 5% 5.5
Tax under Composition Levy @ 1% 1.1 Total Invoice Value 115.5

In this illustration we can see that, a trader, who is in the middle of the value chain is better off remaining under the normal provisions, where his net tax liability is only INR 0.5 (i.e Output Tax of INR 5.5 – Input Tax of INR 5.0). Whereas under the composition scheme his net outflow on taxes would be INR 1.1.

Now to this let us add the cost of compliance under both the schemes, being INR 1 under normal provisions and INR 0.5 under composition scheme.

Total outflow under the normal provisions is INR 1.5 and under compositions scheme is INR 1.6, making it more beneficial to still continue under the normal provisions.

Illustration 3

Let us take the example of a restaurant that is eligible to opt for the Composition Scheme based on our earlier discussion to understand the benefits of remaining under the normal provisions versus composition scheme.

In a restaurant business, we should be aware that there will be a certain amount of exempt/ nil rated inputs. Let us assume the value of these inputs to be 20% of the total inputs and the tax rate for the remaining inputs to be 18%.

 

Under Composition Scheme   Under the Normal Provisions
Particulars Amount

(INR)

  Particulars

Amount

(INR)

Total Value of Inputs 62.5 Total Value of Inputs 62.5
Tax on 80% of Inputs at 18% 9.0 Tax on 80% of Inputs at 18% 9.0
Total Cost 71.5 Total Cost 62.5
Mark up @ 40% 28.5   Mark Up at 40% 25.0
Sale Price 100.0 Sale Price 87.5
Composition Levy at 5% 5.0 GST* at 18% 15.8

In this illustration we can see that, the net benefit for a person under the composition scheme is INR 1.5 (i.e Output Tax of INR 5.0 – Incremental Gross Margin of INR 3.5). Whereas under the normal provisions his net outflow on taxes would be INR 6.8, making it more beneficial to opt for the Composition Scheme.

These illustrations are only indicative of how an impact analysis may be done to choose between compliance under the normal provisions and composition scheme. You may have to consider additional factors unique to each business and industry. For example in illustration 2, the final sale price of the product under the composition scheme is more competitive to the sale price under the normal provisions. If the majority of the industry (both manufacturers and traders) are under composition levy, then persons under normal provisions may take a hit on the sales volumes or if they discount the price, then a hit on the profit margins.

(*GST = CGST + SGST)

I am a Chartered Accountant with 5 years of experience in both Consulting (KPMG) and Industry (Tapzo).

I am currently assisting various Organizations in understanding the impact of GST on their businesses to help them with a smooth transition.

Key areas of experience include:
– GST
– Developing SOPs and Process Implementation
– Identifying and Implementing Internal Controls as required by the ICFR Framework
– Training and Development of staff in various Finance/ Audit functions
– Statutory Audits

141 Comments
  1. Bharat bhalla 3 months ago

    can we opt composition scheme if i have stock of iss purchase and willing to pay the tax according to current regime on stock ?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Bharat,

      You will not be able to opt for Composition Scheme if you hold stock purchased in the course of inter state trade/ stock transfers or imports. The Act does not provide for a remedy in this situation.

      Regards,
      Bhavana Nagendra

      • Amrish 3 months ago

        But I have heard about reverse charge on inter state purchase stock need to pay reverse charge and go for composition scheme

        • Author
          Bhavana Nagendra 3 months ago

          Hi Amrish,

          That option is available only for unregistered dealer purchases.

          Regards,
          Bhavana Nagendra

  2. Seshu 3 months ago

    we have a bakery which is air-conditioned where we also have sitting availability. Now since we arranged sitting for the convenience of the customers will it fall under supply of services or traders. We sell products which fall under different slabs of GST. Kindly help us how we should charge our customers. Should we charge according to the Restaurant Services or charge customers based on the what they buy from us

    • Author
      Bhavana Nagendra 3 months ago

      Hi Seshu,

      Yours is clearly a restaurant and food supply service. If your turnover is less than INR 75 lakhs you can opt for composition scheme at 5% tax. If you choose to opt for the regular tax scheme, the tax rate would be 18% under restaurant and food supply service and not by the item sold.

      Regards,
      Bhavana Nagendra

  3. mahesh mehta 3 months ago

    My turnover in fy 2016 2017 is around 80lakh. But now my sale is dicreeased… its may be around 60 lakh in this f y. Because of this, may i iligible for composition scheme? Vat return for apr to june 17 filed by me is for 13 lakh only.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Mahesh,

      You will not be able to opt for the Composition Scheme for the FY 2017 – 18. However, since your turnover for the said year will be less than INR 75 lakhs, you can opt for Composition Scheme from 1-Apr-18 by filing an intimation in form GST CMP 02 in February 2018 or March 2018.

      Regards,
      Bhavana Nagendra

  4. hitesh 3 months ago

    hi, i am stationery retailer I registered for vat just in june and my expected turnover is only 15 lacs no stock purchased till 30 june.. should i take composition scheme or regular… most of the items are 12% category

    • Author
      Bhavana Nagendra 3 months ago

      Hi Hitesh,

      Please could you tell me if you have any other source of income apart from the stationery retail store?

      Regards,
      Bhavana Nagendra

      • hitesh 3 months ago

        no other source of income except interest received from fdr about 25000 per year

  5. lalit 3 months ago

    hello, i am running photocopy and computer printing from same multifunction machines used for photocopy shop registered under tin/vat what are the gst tax rates for my business. photocopy prints comes under service or goods category. can i go for composition scheme

    • Author
      Bhavana Nagendra 3 months ago

      Hi Lalit,

      This would be a service taxed at 18%. You will not be able to opt for Composition Scheme.

      Regards,
      Bhavana Nagendra

      • lalit 3 months ago

        but paper is not supplied by customer.. i think it will cover in hsn 4911.. pls check n reply.. it will be under 12% gst goods category

    • Author
      Bhavana Nagendra 3 months ago

      Hi Lalit,

      This will be categorised as a service under GST and hence you will not be able to opt for Composition Scheme.

      Regards,
      Bhavana Nagendra

  6. Amit Vani 3 months ago

    Mam

    Which Type of industries is not coverd under that scheme??

    • Author
      Bhavana Nagendra 3 months ago

      Hi Amit,

      All industries under trading and manufacturing are covered. In case of services only restaurant and food supply is covered.

      Regards,
      Bhavana Nagendra

    • Author
      Bhavana Nagendra 3 months ago

      Hi Amit,

      All industries under trading and manufacturing are covered. However, only restaurant service is covered.

      Regards,
      Bhavana Nagendra

  7. SUNIL 3 months ago

    i am a regular dealer under vat. i want to switch over to composition under GST. AS PER MY LAST RETURN I DO NAT HAVE ANY VAT REFUND. dO I NEED TO REVERSE THE INPUT TAX ON STOCK HELD FOR SWITCHING OVER TO COMPOSITION OR I NEED NEED PAY ANY TAX AND SIMPLE FILE APPLICATION FOR COMPOSITION UNDER GST

    • Author
      Bhavana Nagendra 3 months ago

      Hi Sunil,

      You will just need to reverse the input tax on stock held at the time of opting for Composition Scheme.

      Regards,
      Bhavana Nagendra

  8. Tripti 3 months ago

    We are a manufacturing concern of kids wear garments. We get printing, embroidery and stitching done from job workers who are not registered. If the job workers opt for composition scheme, then we have to pay GST on reverse charge for getting job work done from them? Is that correct? Is it beneficial for us to get them registered?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Tripti,

      If any purchases are made registered person under Composition Scheme, then you do not have to pay tax on the charges paid to them on reverse charge. Job workers cannot opt for Composition Scheme.
      If they are not registered, you need to add them as your place of business before moving any goods to them for getting work done. Also, you will have to pay tax on RCM for charges paid to them.

      Regards,
      Bhavana Nagendra

  9. Prashanth 3 months ago

    I run a photography Studio ans my turnover is less than 75 lakhs, can i opt for composition tax

    • Author
      Bhavana Nagendra 3 months ago

      Hi Prashanth,

      This is a service under GST and the only service allowed to opt for Composition Scheme under GST is Restaurant Services. Hence you will not be able to opt for Composition Scheme.

      Regards,
      Bhavana Nagendra

  10. robin 3 months ago

    Hi Bhavana,
    I am a govt nd army order supplier and in my business i just issue retail invoice at the point of sale. my current turnover is around 45 lakh yearly, all my sale generally are interstate…. my question is can i opt for GST composition scheme when all my sales are retail invoice sales to different govt department .

    • Author
      Bhavana Nagendra 3 months ago

      Hi Robin,

      Since you are engaged in inter state sales, you cannot opt for Composition Scheme.

      Regards,
      Bhavana Nagendra

  11. Jatinder 3 months ago

    We r running general store n turnover is around 55 lakhs.will composition scheme will be beneficial?We r dealing mostly taxeable items

    • Author
      Bhavana Nagendra 3 months ago

      Hi Jatinder,

      If your store has to sell goods at the fixed MRP, you can go in for Composition Scheme.

      Regards,
      Bhavana Nagendra

  12. Jitendra 3 months ago

    Hi mam
    We have bar n restaurant opened recently. We serve food n even liquir n our agrreegate turnover for the year will not cross above 75 lakhs. So we are eligible to opt for composit scheme of gst .

    • Author
      Bhavana Nagendra 3 months ago

      Hi Jitendra,

      You will not be eligible for Composition Scheme if you are serving liquor.

      Regards,
      Bhavana Nagendra

  13. Aditya Tibrewal 3 months ago

    Hi, we regularly offload our work on Job Work basis to local Job Work Companies.. Please give detailed information on Composition Scehme of GST on Job Work.. Like what is the Total Limit of Turnover that can be done by the Job Work Company under Composition Scehme.. Also what would be GST payable by him to Govt.. And can he charge us the GST on his Invoices submitted to us or he will have to bear by himself.. Thanks

    • Author
      Bhavana Nagendra 3 months ago

      Hi Aditya,

      A job work is classified as service under GST and the only service provider who can opt for Composition Scheme under GST is Restaurant and Food Supply. Hence a Job Worker cannot opt for Composition Scheme. Since he has to register under the normal provisions, he has to collect the GST from you on the invoices issued to you.

      Regards,
      Bhavana Nagendra

  14. Deepak 3 months ago

    Hi Bhavana Ji
    Please confirm tax rate for mithai Wala sweets in composition scheme 1℅ or 5%

    • Author
      Bhavana Nagendra 3 months ago

      Hi Deepak,

      If you are providing seating and/or delivery services, the 5%. If it is just sale of sweets over the counter 1%.

      Regards,
      Bhavana Nagendra

  15. Prashant Hiran 3 months ago

    I am having Mobile Recharge commission income only. Companies requires GST registration number. But my commission not more than 1 lakh per annuam. Can I get to required GST Number.What is the rate I have to charge to customer

    • Author
      Bhavana Nagendra 3 months ago

      Hi Prashant,

      Do you have any other source of income? If yes, once you register under GST, all your incomes will be liable to GST.

      You can get a GST registration number and file your returns through the nearest GST Facilitation Centre. You will have to charge GST on the commission you earn from the Companies. No GST on the customer.

      Regards,
      Bhavana Nagendra

  16. Anish Mahajan 3 months ago

    Can a composition dealer purchase goods from out side states

    • Author
      Bhavana Nagendra 3 months ago

      Hi Anish,

      The only restrictions are you should not make an interstate sale and you should not hold stock from interstate purchase on 1st July. So yes you can make inter state purchases under the Composition Scheme.

      Regards,
      Bhavana Nagendra

  17. Sanjay 3 months ago

    What about RWA’s with turnover more than 20 lacs in a year ?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Sanjay,

      Please do email me your contact details to discuss this further.

      Regards,
      Bhavana Nagendra

  18. ISMAIL 3 months ago

    We are in fabrication of grill and windows, As small scale industry.
    Let me know can I go for composition tax and what the laws applicable?
    Thanks

    • Author
      Bhavana Nagendra 3 months ago

      Hi Ismail,

      It is a service and hence you will be liable to GST under the regular scheme.

      Regards,
      Bhavana Nagendra

  19. Zoher Kheriwala 3 months ago

    Hi, I am a textile dealer and manufecturer of readymade garmments. My business is B to C. I have taken composition scheme, Can i sell goods to end customer who comes from other other state or country? Some times it happends that goods are not available but customer makes entire payment and takes bill of supply from me with the commitment of goods will be couriered to them. can i courier goods to end customer interstate pls reply.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Zoher,

      What you have mentioned is inter state sale. One of the restrictions of Composition Scheme is not to be engaged in interstate supply. Request you to reconsider your option for Composition Scheme or re-structure your transactions to comply with it.

      Regards,
      Bhavana Nagendra

      • amit 3 months ago

        I am a manufacturer of cold drink and my turnover is 40 lakh .Can I opt composite scheme.

        • Author
          Bhavana Nagendra 3 months ago

          Hi Amit,

          Yes you can. Please ensure all the other conditions are satisfied as well.

          Regards,
          Bhavana Nagendra

  20. Archit Nevatia 3 months ago

    What will be applicablity of composition scheme on second hand car dealers if they are involved in only intra State trading . Wht wi be aggregate turnover his margin or total sales value?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Archit,

      Please send me your contact details so we can schedule a call and discuss your business model so I am better placed to help you with this question.

      Regards,
      Bhavana Nagendra

  21. Prakash 3 months ago

    i am doing business of provison store and my total turnover is 40 lakhs out of which 25 lakhs are taxable and 15 lakhs are tax free .. so if i select composition scheme then i have to pay tax on 25 lakhs or 40 lakhs.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Prakash,

      Tax will be payable on INR 40 lakhs.

      Regards,
      Bhavana Nagendra

  22. harish kumar Gupta 3 months ago

    Hi I want to know GST tax applicable to input or output or total turnover can you help me

    • Author
      Bhavana Nagendra 3 months ago

      Hi Harish,

      Sure I can. Please send me your contact details so we can schedule a call to discuss the details.

      Regards,
      Bhavana Nagendra

  23. Jogmoy Dey 3 months ago

    Hi I am grocery and Mobile recharge retailer. may i iligible for composition scheme? I want to know mobile recharge come under service or goods.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Jogmoy,

      Mobile recharge is a service and hence you will not be able to opt for composition scheme. If you have only a grocery store under your registration/ PAN then you may opt for the Composition Scheme.

      Regards,
      Bhavana Nagendra

  24. Ms. Desai 3 months ago

    Hi Bhavna Mam, We are registered under GST and are in service field. If we purchase goods from supplier who is under composition scheme, what would be tax implication on us? Need we take any declaration from the supplier about he availing composition scheme? Regards.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Mr. Desai,

      There is no tax impact on you. The invoice of the Composition Dealer must state that he is selling goods under the Composition Scheme. You do not need any other document apart from this.

      Regards,
      Bhavana Nagendra

  25. Venkat 3 months ago

    We run printing press and rubber stamp shop which comes below 50lacks turnover. Our business is only with Tamilnadu state. Our job structure is, buying paper from paper shops and getting printing works from other printing press (not by us), and sold as printed binded letter heads, printed covers and multicolour brouchers to our clients. And Rubber Stamps, we made by us using our machines.

    Whether can we opt in composition scheme?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Venkat,

      Sure you can. Please ensure all other conditions under the scheme are comlied with.

      Regards,
      Bhavana Nagendra

  26. pragnesh patel 3 months ago

    I am trader and have business of ready made tobacco products wholesaler…can i opt for composition scheme?? You have told that any traders can avail this scheme,Is there any rule that traders of some products can not avail composition scheme like ready made tobacco products??

    • Author
      Bhavana Nagendra 3 months ago

      Hi Pragnesh,

      GST is not applicable for the following:
      a. Manufacturers ice-cream, pan masala or other tobacco products and tobacco substitutes
      b. All service providers except restaurant and food supply.

      Anyone except the above can opt for Composition Scheme.

      Regards,
      Bhavana Nagendra

      • pragnesh patel 3 months ago

        Thank you mam for your valuable reply..I just want to know that my sale is only my state not intrastate selling but can i make purchase intrastate in composition scheme??

        • Author
          Bhavana Nagendra 3 months ago

          Hi Pragnesh,

          Yes you can.

          Regards,
          Bhavana Nagendra

    • Lalitsatya Sain 2 months ago

      hi pragnesh patel
      you are eligible for composition scheme

  27. GourishankerPatil 3 months ago

    Mam iam owning a bakery where I purchase raw materials and manufacture bakery foods like bread,buns,khari,rusks,cakes,puffs,sandwich, burgers n sweets,etc..In the same time I even purchase biscuits, chocolates, chips,cold drinks,icecreams n some snacks. .. Please suggest me where n under what GST scheme I have to register, Whether under composition or regular. .where my transaction is somewhere around 200000 lakh to 2500000 lakh per annum. .

    • Author
      Bhavana Nagendra 3 months ago

      Hi Gourishanker,

      You can opt for composition scheme provided you comply with all the conditions necessary under Composition Scheme.

      Regards,
      Bhavana Nagendra

  28. Ninad Gawli 3 months ago

    Hi, bhavna madam
    I am having restaurant which has partly air condition facility but my turnover is less than 75 lakhs can I opt for composition scheme please reply

    • Author
      Bhavana Nagendra 3 months ago

      Hi Ninad,

      Sure you can. Please ensure the other conditions are met.

      Regards,
      Bhavana Nagendra

  29. Ram 3 months ago

    If there is unregistered purchases still RCM applicable for dealer under composition scheme

    • Author
      Bhavana Nagendra 3 months ago

      Yes Ram.

      Regards,
      Bhavana Nagendra

  30. Dimple Thakkar 3 months ago

    if there is dealer of bakery product who produce the bakery product as well as sell the Bakery product then which rate is application for composition scheme i.e. for manufacturing 2% or Trading 1%

    • Author
      Bhavana Nagendra 3 months ago

      Hi Dimple,

      Effectively you are making money out of the trading activity, hence 1%.

      Regards,
      Bhavana Nagendra

      • Ankur Khare 3 months ago

        Manufacturing of bakery item are liable 1% or 2% ? Plz recheck

        • Author
          Bhavana Nagendra 3 months ago

          Hi Ankur,

          This completely depends on the nature of activity you are carrying on. Please get in touch with your Chartered Accountant for any clarifications you need or feel free to email me your contact details with a scheduled time for a call to discuss the details to give to the correct rate.

          Regards,
          Bhavana Nagendra

  31. Rakesh Kumar 3 months ago

    We are franchisee of branded Ice Cream and running a parlour. Whether we will be covered under trader category of Composition scheme of GST.

  32. rajagopal kanaka 3 months ago

    dear madam,

    We have registered under GST , if we made purchase any items from a person who opted composition scheme whether we have to pay tax on reverse or not. The person ( composition shceme dealer ) is not charging any tax , but the registered person has to pay tax on reverse or need not to pay any taxes. if yes , kindly let me know the tax rates.

    Thanking you,

    • Author
      Bhavana Nagendra 3 months ago

      Hi Rajagopal,

      You do not have to ay tax on reverse charge basis for purchases made from a composition dealer.

      Regards,
      Bhavana Nagendra

      • Devita Sharma 3 months ago

        Hii Maam,
        We are running medical foundation which is registered under companies act, 2013 and polyclinic diagnostics in the same premises and having Turnover below 75 lacs in preceding year, so can we opt for composition scheme under GST. What will be the conditions for billing & invoices for patients.

  33. Essar 3 months ago

    Hi Bhavana,

    Thank you for nice article. If I opt for Composition scheme can I sell the goods at MRP printed which will includes all taxes.

    Thank You

    • Author
      Bhavana Nagendra 3 months ago

      Hi Essar,

      Yes, you can.

      Regards,
      Bhavana Nagendra

  34. Rakesh Jain 3 months ago

    if there is dealer of bakery product who produce the bakery product like bread and puffs as well as sell the Bakery product with the service of providing tea & Coffee (having seating arrangement) then which rate is application for composition scheme i.e. for manufacturing 2% or Trading 1% or food & restaurant service 5%

    • Author
      Bhavana Nagendra 3 months ago

      Hi Rakesh,

      5%.

      Regards,
      Bhavana Nagendra

  35. Vansh Audichya 3 months ago

    hi mam

    I recently registered under GST as a composite dealer. Earlier i was not registered under any law. i would like to know whether i have to pay tax on goods lying in stock as on 30 june or not? if yes then what is the procedure.

  36. Indu Silk Store 3 months ago

    Hi,

    I’m registered under composition scheme and selling uniform clothes in Delhi.
    If a registered person come from UP & Haryana to purchase uniforms form my shop, Can I bill to them at their UP/Haryana address and by writing Place of delivery at counter sale on Bill of Supply.

    • Author
      Bhavana Nagendra 3 months ago

      Hi,

      If you are registered under the Composition Scheme, you cannot make inter state sales.

      Regards,
      Bhavana Nagendra

  37. Kaleel 3 months ago

    Hi , I am dealer in immitation jewellery and my turnover is less than 20 lakhs.But still I have registered as composit dealer , is it is ok and good for my business.What is tax rate for Immitation jewellery.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Kaleel,

      1% under Composition Scheme.

      Regards,
      Bhavana Nagendra

  38. Prasun mandal 3 months ago

    My turn over is less than 20 lacks around 18 Lacks .if I will be a composite dealer .so the percentage of tax I have to pay?
    I am a trader.

    • Author
      Bhavana Nagendra 3 months ago

      Hi Prasun,

      1%

      Regards,
      Bhavana Nagendra

  39. Vickey Juneja 3 months ago

    I have a turnover of around 65 lacs and most items are under 28% GST as i deal in electronic goods LED Ac W/machine and all.My other sources of income in my file is rental and interest received and electronics Repairing. should i go in Composition… Is that a good choice for me…

    • Author
      Bhavana Nagendra 3 months ago

      Hi Vickey,

      Whether or not to choose Composition Scheme would require an impact analysis of the outflow net off input credit under the regular provisions vs Composition Scheme and other factors that have an effect on your business.

      If you need this done, please email me your contact details with a scheduled time for a call to discuss the details we need to do it.

      Regards,
      Bhavana Nagendra

  40. vijay kumar 3 months ago

    Sir ..
    I started new businesses of readymade garment in composition scheme now i m paying 40000/ monthly rent to unregistered landlord….i want to know gst liability on rent paid by me

    • Author
      Bhavana Nagendra 3 months ago

      Hi Vijay Kumar,

      You will have to pay 18% on INR 40,000 on reverse charge basis.

      Regards,
      Bhavana Nagendra

  41. Mohiy 3 months ago

    I am not registered under Vat or service tax and my turnover in previous year 16-17  was 45lakh but from 1st April 2017 to 30june2017 is 10lakh then can I wait for gst registration until it goes to 20lakh and continue my billing with older format(Cash Memo) ?

    • Author
      Bhavana Nagendra 3 months ago

      Hi Mohit,

      Yes you can.

      Regards,
      Bhavana Nagendra

  42. Aaryan 3 months ago

    Hi Bhavna,

    Please let me know the effective date to calculate aggregate turnover for composition scheme. Whether it’s start from 01-07-2017 to 31-March 2018 or from 01 April 2017 to 31 March 2018? Please reply

    • Author
      Bhavana Nagendra 2 months ago

      Hi Aaryan,

      It is from 01-04-16 to 31-03-17.

      Regards,
      Bhavana Nagendra

  43. B.MD.SHABBIR 3 months ago

    How to carried forward closing stock held on 30/06/2017 from VAT to GST (input carried forward) by classification of rate of tax @ 5.5% and 14.5% if i have got closing stock of Rs.300,000 in respect of automobile spares and accessories with calculation.

  44. Ankit Singhal 3 months ago

    Dear Bhavna,

    My father is running a retail grocery store and he also has rental income from renting of immovable property(one house property) for residential purpose. Such renting is a supply of service under GST although it is exempt. Turnover from trading business is less than 75 lakhs. As i know, opting for composition scheme requires that taxpayer shall not be engaged in supply of service. So please suggest whether my father can opt for composition scheme for his trading business or not ? If no, then this would be problem for small traders who also earn rental income from renting even a single flat ?Thanks.

    Regards,
    Ankit Singhal

    • Author
      Bhavana Nagendra 2 months ago

      Hi Ankit,

      Unfortunately he cannot opt for composition scheme. However, you could get in touch with me via email to find alternate solutions to this situation.

      Regards,
      Bhavana Nagendra

  45. R. Kamakshi 2 months ago

    Hi Bhavana
    We are a start up firm engaged in the manufacture of floor cleaners. We have opted from composition levy scheme. We don’t collect taxes when we raise a bill of supply to distributor or retailer as per composition levy scheme. However distributor or retailer are they supposed to collect GST (HSN code 3402 – 28% slab for floor cleaners under chapter 34) during sale or can they pass the benefit to customer without taxes . Please clarify. This is affecting my supply chain as few distributors and retailers are reluctant to purchase from us.

    • Author
      Bhavana Nagendra 2 months ago

      Hi Kamakshi,

      Only you should not collect taxes on sale. The wholesaler or retailer, if not registered under composition scheme is required to collect taxes at 28% from their customer. You could get in touch with me via email if you need an understanding of whether composition scheme or regular scheme will be beneficial to you.

      Regards,
      Bhavana Nagendra

  46. T K Sen 2 months ago

    I have a computer repairing shop and repairs computers/printers. I have registered my firm under composite scheme. Earlier I was not registered under service tax because my turn over was less than 10000/- . Now what I have to do.

    T K Sen

  47. Hegde 2 months ago

    Hi, Madam,

    Can Jewellery traders opt for composition scheme?

    • Author
      Bhavana Nagendra 2 months ago

      Hi Hegde,

      Yes.

      Regards,
      Bhavana Nagendra

  48. Minal Kolambe 2 months ago

    Hi Bhavana,

    Can the dealer registered under composition scheme, switch/change to regular/normal scheme. if yes then what is the procedure for the same.

  49. Sudha 2 months ago

    Hi , if someone has a business of supplying food to offices and also runs a food outlet in a super market, can he opt for composition scheme?

    • Author
      Bhavana Nagendra 2 months ago

      Hi Sudha,

      Yes.

      Regards,
      Bhavana Nagendra

  50. Anand 2 months ago

    Thanks for a detailed informative article.

    I have a textile printing unit. We get fabric, design, colour & chemical from our parties who are located within 10 kms. radius of our unit. We print their fabric using design, colour & chemical provided by them. We resend the printed fabric to them and invoice them with printing charges.

    Can I opt for the composition scheme?

  51. sudhir Aman 2 months ago

    Hi mam
    Iam running a food stall in premises of cinema in a mall and i have registred my self in gst and have taken GST CERTIFICATE and turn over is less than 20 lacs and i have opted for composition scheme
    Cinema owners are putting gst @18% on my rented amount,
    what % gst to be paid by me to cinema owner. Can i charge gst@18% on food items iam selling on my food stall?????
    Or let me know if any better solution
    Plz let me ASAP
    REGARDS
    SUDHIR
    8009192254

  52. deepak 2 months ago

    i am purchasing the nil rated, exempted or non gst goods from composition dealer . where is showing the entry in gstr 2. head in purchase from compision dealer or head in nil rated item, exempted item or non gst item . what is suitable head

  53. Ankit Singhal 2 months ago

    Hi Bhavana,

    If you can provide me your email address ?

    Regards,
    Ankit Singhal

  54. Kaushal 2 months ago

    I opt composition scheme before 10 day but now i reliase i am not able for composition scheme.i have no old stock and no bill is issued in july so how can i leave composition scheme.

  55. Kaushal 2 months ago

    Can a normal tax payer buy goods from dealer who opt composition scheme and can he avail tax credit?

  56. GANESH 2 months ago

    If I opts for a composition scheme. My sale of goods is Rs. 5,000 taxable goods, Rs. 2,000 exempt goods and Rs. 1,000 tax free goods in GST. Now the question weather I need to pay 1 % on Rs. 5,000 or on Rs. 8,000 ?

  57. GANESH 2 months ago

    If I opts for a composition scheme. My sale of goods is Rs. 5,000 taxable goods, Rs. 2,000 exempt goods and Rs. 1,000 tax free goods in GST. Now the question weather I need to pay 1 % on Rs. 5,000 or on Rs. 8,000 ?

  58. Arindam 2 months ago

    Sir/ mam can anyone tell me what was the last date to apply in composition or input output scheme?

    Thanks

  59. Surendra Jain 2 months ago

    Hello mam,
    I buy auto part from Delhi and sell them in Bihar only. My turnover is less than 30 lacs. Am I eligible for composition scheme. I have already registered for GST.

  60. vijay Savaliya 2 months ago

    1st que:
    Can composition dealer avail service if job work? N
    2nd que:
    If job worker do job work on plain cloth n deliver to client after when job work done but client reject such goods then what is the treatment for the same in the books of Job worker in terms of ITC and Stock N Gst liability?

  61. kuber 2 months ago

    kuber mam iam running printing bussness but only job work and out sorces all sort of printing i have small office to do dtp work weather i come under composition gst tel me pls ternover yearyly around 3.5 lachk

  62. Amit 2 months ago

    I run a business involving trading in goods with a turnover between 20 to 30 lakh. I have opted for composition scheme. However afterwards I realised that I also have rental income of rs 75000 per annum. What do you suggest?

  63. Anna 2 months ago

    I am a small manufacturer of chocolates. I opted for composition scheme. what happens when I sell to a large store complying with regular GST? do they have to pay 28% GST on tax return. I cannot give hime more than 30% margin. I am frustrated.

  64. Deepak 2 months ago

    Hi mam
    I want to cancel the composition scheme and migrate to regular dealer what i hav to do??h

  65. anish 2 months ago

    hello mam,
    i have query that if a dealer have income from interest in his trade business then he is eligible to opt composition scheme under gst act or not

  66. rachna 2 months ago

    I am a government supplier can I opt composition scheme under gst, my turnover below 75 lakhs.
    i am only supplying in my state. ….

  67. Dileep Panchal 2 months ago

    hi bhavna, can a photo studio operator / owner opt for composition scheme?

  68. Rehan 2 months ago

    what’s state code do I need to mention in my BILL of Supply I am composite dealer and Do it need to mention HSN code? and pls one more what’s difference between unit and QTY

    Regards

  69. sharmi 2 months ago

    my father is keeping hotel ….were our accountant didnot register for compounding tax ….due to this other accountant is saying that we have to go for GST …..if in case the webportal opens for Compounding tax then at that time we can go for it ……………but my father got confused …he didnot know wat to do

  70. Neeraj 2 months ago

    Mam I deal in kids garments n have interstate purchase,but at d end of June my stock is nominal amount.my turn over is below 20lacks.can I go for composition or should I cancel my registration as turn over is below 20 lacks

  71. Kantaraj T 2 months ago

    Hi Bhavana,
    I was on Composition tax under VAT(Karnataka). Is my registration automatically in composition? What is the rate of Composition Tax on Plant & Machinery?
    Kantaraj T
    9845019715

  72. Smit kotak 2 months ago

    I have opted for normal scheme and i want to shift in composition scheme. In current year they are saying no for the same. Can i get amother registration number of the same party and will opt for composition scheme and the old number i will apply for cancelation. As of now there is no such procedure for cancellation so should i continue to file NIL return under regular scheme and actual tax under compaition scheme?? Please help. Thank you
    Smit kotak

  73. Kamal Jain 2 months ago

    Hi Bhavana,
    We manufacture plastic pipes used in agriculture. We have opt for composition scheme. But from whom we purchase raw material is also under composition scheme. So do we have to pay any reverse charge on it. Both of us are manufacturers. Please suggest what process would be there under composition scheme.

  74. KISORE BAG 2 months ago

    I have an monthly income of Rs. 5 Lacs from a rent of commercial business place. Can I have taken GST Regn under composite scheme?

  75. BANTI CHANDA 2 months ago

    HI I M BANTI … I have a wholesale readymade garments shop .. I m in GST composition scheme. My question is can I purchase clothes from other state in this scheme ? Likes DELHI OR KOLKATA.. MY SHOP IN ASSAM LANKA…

  76. Prasanna 2 months ago

    Will the printing business eligible for opting composition scheme?

  77. George 2 months ago

    Doubt is firm registered as regular and unfortunately on august 16th opted composition scheme mistakenly.

    Suggest how to switch to regular.

  78. Sourabh 2 months ago

    I have a Printing press where in i purchase paper ink and other allied items from the supplier and then print forms or bill books, boxes,flex etc . Whether i am eligible for composition ?

  79. Ankit gupta 2 months ago

    Hi Bhavna,
    I have my retail outlet of sweets and namkeen.Here all the sweets and namkeen were manufactured my me and i have. Confusion of gsts rates under composition scheme can u tell me the gst rate category for me 2%or 5%

  80. Krishan 2 months ago

    Hi…
    Is the composition scheme available for boutiques as they both service provider and Traders…???

  81. Sunil Karnatak 2 months ago

    Dear,
    Madam we are registered manufacturer under
    Composition scheme, ( under tax slab of 5%, on regular course) we raise our invoice without tax, did our registered dealers/retailers are liable to pay tax on total invoice value of without tax,( ours)
    will there rate will be the 5% as of
    Regular course, or they are also responsible to
    Not collect any tax on their invoice.
    Pls reply 7500244022 or mail me. skarnataks@gmail.com

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