GST Composition Scheme (Grade A)

Summary:

The GST Composition Scheme note explains that the Composition Levy Scheme is a voluntary, simplified option for small taxpayers to save from complicated compliance procedures. Applicable initially for goods, the scheme expanded to services from April 1, 2019. The threshold for goods is Rs 1.5 crore (Rs 75 lakh for North-Eastern states and Himachal Pradesh). For services, a composition dealer can supply services up to 10% of turnover or Rs. 5 lakhs, whichever is higher. The scheme is not available for certain businesses, such as manufacturers of specific goods, inter-state suppliers, or those using e-commerce operators. This GST Composition Scheme note also mentions that composition dealers cannot claim input tax credits, must pay tax at normal rates for reverse charge transactions, and must display their status on signboards and bills. They must pay quarterly taxes and file quarterly and annual returns.

Excerpt:

GST Composition Scheme

COMPOSITION LEVY SCHEME (SECTION 10)

Introduction to GST Composition Scheme
– Scheme for small taxpayers- simple and easy, save from many complicated compliances/procedures.
– Voluntary and optional.
– Applicability – Applicable for goods initially but services also included from 1.4.2019
– Threshold limit (goods) – A taxpayer whose annual turnover is below Rs 1.5 crore can opt for Composition Scheme. In the case of North-Eastern states and Himachal Pradesh, the limit is Rs 75 lakh.

Threshold limit (services) – A composition dealer can also supply services to an extent of 10% of turnover, or Rs.5 lakhs, whichever is higher (w.e.f. 1.2.2019). Alternatively for suppliers of services or mixed suppliers whose annual turnover is up to Rs 50 lakhs.

The GST Composition Scheme is not available for the following taxable persons:-

• Manufacturer of ice cream, pan masala, or tobacco
• A person making inter-state supplies
• A casual taxable person or a non-resident taxable person
• Businesses that supply goods through an e-commerce operator
• A person making supplies of goods or services not taxable under GST