Want to Register under Composition Scheme in GST? Check your Eligibility

10 months ago
Composition Scheme

Businesses have to balance between managing their business and strive towards profitable venture. At the same time, caution and care require towards compliance to various laws of the land. Over the past decade, with compliance in our country, though have taken the technology route, the amount of information to furnish has increased. This naturally calls for dedicated time on the compliance front as they have a periodic deadline.
India is predominantly an SME oriented business environment. This transpires to the limitation of resources of 3M: men, money and materials, and an elaborate compliance will be a costly affair for the small segment of businesses.

The process of maintaining numerous records, monthly payments, a filing of a monthly return, and so on, is too much for small traders who are trying further their business. As a result, in GST, a scheme called Composition Scheme introduces.

Under this scheme, you require to file your returns and pay tax at a certain percentage of the turnover on a quarterly basis. This means, on outward supplies (sales), you will not allow to charge GST. Instead, you need to pay at fixed percentage on a quarterly basis and also you will not be eligible to claim input tax credit on your inward supplies (purchases).

Composition Scheme Rate
Applicability Rate
Manufacture 2%
Trader 1%
Supplier of food or drinks for human consumption 5%

The following will help you to Check Your Composition Eligibility for registering under Composition Scheme:

1. Threshold Limit of your turnover in previous financial year

To apply for Composition Scheme, your turnover in the previous financial year should not exceed Rs. 75 Lakh. If your business is located in any of these States: Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, the turnover in the previous financial year should not exceed Rs. 50 Lakh.

2. Not applicable for service providers

If you are a service provider, you cannot opt for composition scheme in GST. However, if you are a service provider engaged in the supply of food and drinks for human consumption, you will allow to opt for Composition Scheme.

3. Not applicable for a manufacturer of Notified Goods

The scheme will not be applicable to the manufacturer of ice cream and other edible ice, Pan Masala, all of tobacco and tobacco substitutes.

4. Limitation on Supply of Goods

If your business is engaged in any of following supplies, composition scheme is not for you:

• Interstate outward supply of goods.
• Supply of non-taxable goods.
• Supply through e-commerce businesses such as Amazon, Flipkart, and so on.

5. Eligibility on the basis of Closing Stock

The closing stock held by you should not contain any stock made the following purchases:

• Interstate Purchase, Imported from outside India or received from your branch/Agent/Principal located outside the State: This is exclusively applicable for a business who were registered under the earlier regime and wanted to opt for the Composition Scheme on migrating to GST.

• Purchases from Unregistered Dealer (URD) – If closing stock contains purchases made from an unregistered dealer, you have to pay GST on reverse charge basis.

6. If Your business is registered as Casual Taxable Person or a Non-Resident Person, you cannot apply for Composition Scheme under GST.

Only when all of the above conditions are met, you will be eligible for GST registration as a Composition Dealer.

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Once you have met the above criteria, you need to file an intimation in the following forms:

1. Form GST CMP-1: A business who has registered under the earlier regime and who wanted to opt for Composition Scheme on migrating to GST. The intimation should be made within 30 days from 21st June 2017, the date on which this provision is in force.

2. Form GST CMP -2: This is applicable for those businesses who have registered under GST regime as a regular dealer and wanted to opt for Composition Scheme. The intimation via this form needs to be done before the commencement of the financial year.
A business applying for fresh registration in GST, and wanted to opt for Composition Scheme, can provide the intimation while the submitting registration Form GST REG -1.Buy Now

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