GST composition scheme – All that you must know

GST composition scheme

As the time is passing by and 1st July, 2017 is coming close, many concepts of Goods and Service Tax are unfolding themselves. We are on the verge of witnessing the biggest tax reform that this nation has ever gone through. Although GST will come into effect from 1st July 2017 but still at least a time period of one or two months will be such when government is intending to be lenient on the assessees in order to get them accustomed to the new taxation regime.

GST composition scheme

In the entire complex GST Act, one of the most important concepts that people are eyeing upon is the ‘Composition Scheme’. Until now concept of Composition scheme was also available in different indirect taxes as well. But what does this Composition scheme actually means? In this scheme you don’t need to worry about other provisions of the Act. All you need to do is to pay a nominal rate of tax. Such, rate of tax is also very small. Even GST also contains provisions regarding GST composition scheme. Section 10 of GST Act mentions provisions regarding Composition scheme which have been mentioned below:

  • This scheme can be availed by any person whose total turnover in the last Financial Year was less than Rs. 75 lakhs.
  • Total Turnover for the purpose of composition includes both Taxable and exempted turnover.
  • For special category states, i.e. North Eastern States the limit has been set at Rs. 50 lakhs. Here’s a list of Special category States as mentioned in sub-clause (g) of clause 4 of article 279A of the Constitution:
    • Arunachal Pradesh
    • Assam
    • Jammu & Kashmir
    • Manipur
    • Meghalaya
    • Mizoram
    • Nagaland
    • Sikkim
    • Tripura
    • Himachal Pradesh
    • Uttarakhand
  • In the event of a person having different businesses in different sectors and having the same PAN number of such person then he has to register all such businesses under the composition scheme.
  • It is to be noted that the moment when the business of a person crosses the turnover limit of Rs. 75 lakhs then such option of composition scheme will lapse automatically.
  • The rates mentioned in GST for composition scheme has been mentioned below:
Type of Business Rate
Manufacturers 1%
Specific service provider, i.e., Restaurant Service 2.5%
Any other dealer 0.5%

Note: The above mentioned rates are as per CGST Act. The total composition rate for composition scheme will be (CGST rate + SGST rate). In simple words, it will be sum of CGST rate (as mentioned above) and SGST rate (every state may have its own rate).

  • Exceptions to this composition schemes have been mentioned below:
    • A service provider providing services other than restaurant services.
    • An assessee dealing in goods which are out of the coverage of the Act, for instance, liquor.
    • An assessee engaging itself in interstate taxable supply.
    • An assessee engaging in supply via e commerce platform.
    • An assessee who manufactures goods as notified by government.
  • One of the biggest advantages of composition scheme is that the assessee needs to file the GST return on a quarterly basis instead of monthly basis. This scheme gives relaxation in compliances with GST norms.
  • As far as invoicing in composition scheme is considered, it is mandatory for the composition dealers to mentioned the words “Composition Taxable Person, not eligible to collect tax on supplies” on all the bills.

This is all about the composition scheme. This scheme has been made for the benefit of the people. If you are willing to opt for this scheme then you must get yourself registered for Composition Scheme.

Also see : GST Softwares


  1. How to Surrender the composition Scheme ? what is the Procedure ? Whether it is available Online or Offline?

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