Introduction to Composition Scheme under GST
The Composition Scheme under Section 10 of the CGST Act, 2017 is a simple and hassle-free tax scheme for small taxpayers. It allows eligible businesses to pay GST at a fixed percentage of their turnover instead of the regular rate, and with reduced compliance requirements (i.e., quarterly returns, no need to maintain detailed records).
📌 Eligibility for Composition Scheme
A registered person can opt for the scheme if:
🔹 Aggregate turnover in the preceding financial year does not exceed:
🔹₹50 Lakhs (standard limit), which can be increased up to ₹1.5 Crore (as notified by the Government on GST Council’s recommendation).
🔹₹75 Lakhs for some special category states (e.g., NE states).
🔸 Explanation: “Aggregate Turnover” includes taxable, exempt, exports, and inter-state supplies under the same PAN across India.
📌 Composition Scheme for Service Providers (Section 10(2A)) – Introduced Later
From FY 2019-20 onwards, a new scheme under Section 10(2A) allows certain service providers and mixed suppliers (goods + services) to opt for composition levy.
✅ Eligibility:
🔹 Aggregate turnover up to ₹50 Lakhs in the preceding financial year.
🔹Cannot make inter-State supply or e-commerce sales.
🔹Tax rate: Maximum 6% (3% CGST + 3% SGST) – as per notification, current rate is 6% on turnover.
📌 Conditions and Restrictions
A person opting for the composition scheme must:
✅ Not supply goods/services not leviable to GST
✅ Not make inter-State outward supplies
✅ Not supply through e-commerce operators required to collect TCS
✅ Not be a manufacturer of notified goods (e.g., ice cream, tobacco, pan masala)
✅ Not be a casual taxable person or non-resident taxable person
✅ If multiple registrations under same PAN, all must opt for the scheme
🔺 Additional Condition (as per proviso):
Can provide services (other than restaurant services) up to 10% of turnover in the preceding FY or ₹5 lakhs, whichever is higher.
📌 Exclusions from Turnover for Tax Calculation
👉 The following are excluded from “turnover in State or Union territory”:
🔷 Supplies made before the person becomes liable for registration.
🔷Exempt supply of services by way of extending loans/deposits (interest or discount-based).
📌 Important Implications of Composition Scheme
🔷 No Collection of GST: Cannot charge GST on outward supplies
🔷No Input Tax Credit (ITC): Not eligible to claim ITC
🔷Bill of Supply: Issue ‘bill of supply’ instead of a tax invoice
🔷Display on Premises: Mention “Composition taxable person” on signboard
🔷Filing Requirements:
CMP-08: Quarterly statement (by 18th of next month)
GSTR-4: Annual return (by 30th April of the following year)
📌 When the Scheme Becomes Invalid
If the aggregate turnover exceeds the threshold during a financial year, then:
🔷 Composition scheme automatically lapses from that day.
🔷Regular tax provisions become applicable.
Tax Rates under Composition Scheme
