Explore the rules, conditions, and compliance requirements for the GST Composition Scheme for FY 2025-26. Learn about tax rates, eligibility, and filing procedures.
Intimation and Effective Date for Composition Levy
Conditions and Restrictions for Composition Levy
Validity of Composition Levy
Rate of Tax
Composition Scheme Compliance
FAQs on Composition Scheme
Learn about the process of opting for the Composition Scheme and the effective dates for different scenarios.
For Persons Already Registered Under Pre-GST Regime
Individuals registered under the previous tax regime must follow specific steps to opt for the Composition Scheme.
File FORM GST CMP-01 electronically within 30 days of the appointed date.
Do not collect taxes during the transition period.
Submit FORM GST CMP-03 within 60 days, detailing stock and inward supplies from unregistered persons.
For Persons Applying for Fresh Registration
New registrants under GST can choose the Composition Scheme at the time of registration.
File FORM GST REG-01 for new registration.
The effective date is the date of grant of registration if applied within 30 days of liability.
Ensure all conditions for the Composition Scheme are met before application.
Registered Under GST and Switching to Composition Scheme
Existing GST registrants can switch to the Composition Scheme by following these steps.
Submit FORM GST CMP-02 to opt for the scheme.
File FORM GST ITC-03 within 60 days to declare ITC on stock.
Ensure compliance with all conditions and restrictions of the scheme.
Understand the eligibility criteria and restrictions for availing the Composition Scheme.
Turnover Limit
The aggregate turnover limit for eligibility under the Composition Scheme.
The turnover must not exceed ₹1.5 crore in the preceding financial year.
For special category states, the limit is ₹75 lakh.
Turnover includes all supplies except exempt supplies and exports.
Ineligible Persons
Certain businesses and individuals are not eligible for the Composition Scheme.
Service providers, except those providing restaurant services.
Manufacturers of notified goods such as ice cream, pan masala, and tobacco.
Casual taxable persons and non-resident taxable persons.
Restrictions on Input Tax Credit
Composition dealers cannot avail input tax credit.
No ITC can be claimed on purchases.
Tax must be paid out of pocket without credit adjustment.
Ensure proper record-keeping for compliance.
The conditions under which the Composition Scheme remains valid.
Annual Review
The eligibility for the Composition Scheme is reviewed annually.
Ensure turnover does not exceed the prescribed limit.
File necessary declarations and returns on time.
Comply with all scheme conditions to maintain validity.
Voluntary Withdrawal
Dealers can opt out of the Composition Scheme voluntarily.
Submit FORM GST CMP-04 to withdraw from the scheme.
Transition to regular GST compliance upon withdrawal.
Declare stock and ITC details in FORM GST ITC-01.
Involuntary Disqualification
Non-compliance can lead to disqualification from the scheme.
Exceeding turnover limits results in automatic disqualification.
Failure to file returns or pay tax on time may lead to penalties.
Maintain accurate records to avoid compliance issues.
The tax rates applicable under the Composition Scheme for different categories.
Manufacturers
Tax rate applicable to manufacturers under the scheme.
A flat rate of 1% on turnover in the state.
No input tax credit is available.
Ensure compliance with turnover limits.
Traders
Tax rate applicable to traders opting for the scheme.
A flat rate of 1% on taxable turnover.
No input tax credit is available.
Maintain records of all sales and purchases.
Restaurants
Tax rate applicable to restaurants under the scheme.
A flat rate of 5% on turnover.
No input tax credit is available.
Applicable only to non-alcoholic services.
Compliance requirements for businesses under the Composition Scheme.
Return Filing
Filing requirements for composition dealers.
File GSTR-4 annually by 30th April of the following year.
File CMP-08 quarterly by the 18th of the month following the quarter.
Ensure timely filing to avoid penalties.
Record Keeping
Maintain accurate records for compliance and audits.
Keep records of all sales and purchases.
Maintain stock registers and tax invoices.
Ensure records are available for inspection.
Billing Requirements
Issue bills of supply instead of tax invoices.
Include details such as supplier's name and GSTIN.
Mention 'composition taxable person, not eligible to collect tax on supplies' on the bill.
Ensure compliance with billing norms.
Who can opt for the GST Composition Scheme?
Businesses with an aggregate turnover of up to ₹1.5 crore in the preceding financial year can opt for the Composition Scheme. However, service providers (except restaurant services), manufacturers of notified goods, and certain other categories are ineligible.
What are the tax rates under the Composition Scheme?
The tax rates under the Composition Scheme are 1% for manufacturers and traders, and 5% for restaurants. These rates apply to the turnover in the state and do not allow for input tax credit.
How do I file returns under the Composition Scheme?
Composition dealers must file GSTR-4 annually by 30th April and CMP-08 quarterly by the 18th of the month following the quarter. Timely filing is crucial to avoid penalties.
Can I switch from the Composition Scheme to regular GST?
Yes, you can switch to regular GST by submitting FORM GST CMP-04. Upon switching, you must comply with regular GST filing requirements and declare stock and ITC details in FORM GST ITC-01.
What happens if my turnover exceeds the limit during the year?
If your turnover exceeds the ₹1.5 crore limit during the year, you must switch to regular GST immediately. File FORM GST CMP-04 and comply with regular GST requirements.
Are there any penalties for non-compliance under the Composition Scheme?
Yes, non-compliance, such as late filing of returns or exceeding turnover limits, can lead to penalties and disqualification from the scheme. Ensure timely compliance to avoid issues.
Can I claim input tax credit under the Composition Scheme?
No, composition dealers cannot claim input tax credit on their purchases. The tax is paid out of pocket without credit adjustment.
What are the billing requirements for composition dealers?
Composition dealers must issue bills of supply instead of tax invoices. The bill should include the supplier's name, GSTIN, and a statement that the dealer is not eligible to collect tax on supplies.
Is the Composition Scheme applicable to service providers?
The Composition Scheme is generally not applicable to service providers, except for those providing restaurant services. Other service providers must opt for regular GST compliance.
How is the turnover calculated for the Composition Scheme?
Turnover for the Composition Scheme includes all supplies made within the state, excluding exempt supplies and exports. It is crucial to maintain accurate records to determine eligibility.