Features of GST Composition

1. Composition Scheme
• Composition Scheme is a simple and easy scheme under GST for
taxpayers. Small taxpayers can get rid of tedious GST formalities and
pay GST at a fixed rate of turnover. This scheme can be opted by any
taxpayer whose turnover is less than Rs. 1.5 crore

2. Persons Opting for Composition Scheme
• A taxpayer whose turnover is below Rs 1.5 crore* can opt for
Composition Scheme. In case of North-Eastern states and Himachal
Pradesh, the limit is now Rs 75* lakh. As per the CGST (Amendment)
Act, 2018, a composition dealer can also supply services to an extent
of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This
amendment will be applicable from the 1st of Feb, 2019. Further, GST
Council in its 32nd meeting proposed an increase to this limit for
service providers on 10th Jan 2019*. Turnover of all businesses
registered with the same PAN should be taken into consideration to
calculate turnover.

3. Persons Opting for Composition Scheme
The following persons cannot opt for Composition Scheme
• 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 which supply goods through an e-commerce operator

4. Conditions for opting Composition Scheme
• Cannot supply GST exempted goods
• Cannot claim credit for taxes paid on purchases
• Normal GST rates to apply for transactions under the reverse charge
mechanism
• Mention ‘Composition Taxable Person’ on every notice, bills of supply
(invoice issued by a composite dealer)
• Can provide services to an extent of 10% of turnover or Rs 5 lakh,
whichever is higher, if you are a manufacturer or trader
• All business verticals registered under the same PAN must opt for this
scheme or otherwise, should opt-out entirely

5. How to opt for Composition Scheme
• To opt for composition scheme a taxpayer has to file GST CMP-02
with the government. This can be done online by logging into the GST
Portal. This intimation should be given at the beginning of every
Financial Year by a dealer wanting to opt for Composition Scheme.

6. Method of Raising a Bill by a Composite Dealer
• A composition dealer cannot issue a tax invoice. This is because a
composition dealer cannot charge tax from their customers. They
need to pay tax out of their own pocket. Hence, the dealer has to
issue a Bill of Supply. The dealer should also mention “composition
taxable person, not eligible to collect tax on supplies” at the top of
the Bill of Supply.

7. GST PAYMENT OF A COMPOSITION DEALER
GST Payment of a Composition Dealer Comprises of the following:
• GST on Supplies Made
• Tax on Reverse Charge
• Tax on purchases from unregistered dealer

8. Merits of opting for the GST Composition
Scheme
• Businesses enjoy higher liquidity since a lower amount of GST has to be
paid to the government
• Businesses enjoy lesser compliance (maintaining records, filing returns,
issuance of invoices, and so on) under this scheme. This also provides
dealers with ample time to focus on core business activities
• Businesses can enjoy a much lesser tax liability when they opt for this
scheme. The biggest advantage of this is for startups and smaller
businesses that often see cash crunches on a regular basis. Most startups
that do not see a turnover of over Rs 1.5 crore are less likely to have extra
cash that can go into taxes. With the composition scheme, the government
has ensured that more startups can flourish in a market that has become
friendlier towards their plight

9. Demerits of Composition Scheme
• Businesses registered under this scheme have a limited territory to
perform their operations since inter-state supplied are not allowed
• Businesses cannot supply exempted goods. For instance, a coconut
trader cannot avail this scheme because coconuts, fresh or dried,
whether or not shelled or peeled fall under exempted goods
• Businesses cannot claim the input tax credit (taxes paid on purchases)
if they opt for this scheme