The GST Composition Scheme is a straightforward and simple GST scheme that has helped several business owners. While not everyone has an established business in order to afford the payment of taxes, the Indian Government has made a provision under the new GST system that those who are part of the Composition Scheme can get rid of multiple GST procedures and opt to pay a specific rate of tax only. Please note that the Composition Scheme applies to those who have an annual turnover of around 1.5 crores. If you fall under this category, then you can fix a certain rate of GST tax that you will pay from your turnover.
Who can Opt for the Composition Scheme?
Table of Contents
- Who can Opt for the Composition Scheme?
- What are the Requirements for the GST Composition Scheme?
- How can you Opt for the Composition Scheme?
- What are the Benefits of the Composition Scheme?
Earlier, it was stated that any business owner who has an annual turnover of approximately 1 crore could opt for the GST Composition Scheme. However, this rule has changed now. According to the new GST Composition Scheme rules, the limit for the Composition Scheme has been raised from 1 crore to 1.5 crores. This is a major relief to innumerable businessmen across the Indian subcontinent. Moreover, the Central Government has left no stone unturned to make it as inclusive as possible. Thus, special priority has been given to North-Eastern residents. If you are a resident of the North-Eastern states and Himachal Pradesh, then the turnover limit for you is restricted to INR 75 lakhs.
What are the Requirements for the GST Composition Scheme?
- If you are opting for the Composition Scheme, then please note that you cannot claim any Input Tax Credit.
- If you are a dealer that wants to register for the Composition Scheme, then you cannot supply GST exempted goods.
- Under the rules and guidelines of the Reverse Charge Mechanism, you need to pay regular taxes.
- Please note that if you own several businesses in multiple domains such as textiles, groceries, and daily goods, then you must check the PAN that they are registered with. If you have used the same PAN, then you need to register them collectively under the Composition Scheme, or you must opt-out of it. There is no way that you can register them separately under the same PAN.
- If your business location displays any notice, then you need to pay extra attention that the words ‘Composition Taxable Person’ are printed on it. Without this, your notices and signboards will not be valid.
- According to an Amendment applicable from 1st February 2019, every dealer has the right to supply services to a limit of 10% of the total turnover, or 5 lakhs. You can choose the higher one and act accordingly.
How can you Opt for the Composition Scheme?
Now that you have complete information regarding the terms of the Composition Scheme and what it means, you must be wondering how to apply for it? It is a very simple and quick process.
The Central Government has made it possible for you to register for the Composition Scheme online via the GST portal. All that you need to do is get online and file for the CMP-01 form. Remember that you cannot do this in the middle of the fiscal year. If you feel that you qualify for the Composition Scheme with an annual turnover of around 1.5 crores, then you must apply and do the formalities at the beginning of the fiscal year.
What are the Benefits of the Composition Scheme?
Dealers Do Not Need to Indulge in Complex Procedures.
One of the biggest problems that Indian business owners faced before the implementation of the GST scheme was that they would have to indulge in a lot of paperwork for the multiple taxes that they had to pay. This was not only time-consuming but also confusing. Under the Composition Scheme, small business owners can escape heavy paperwork, insurance schemes, and maintenance of records. You can easily apply for the Composition Scheme online, and there is a complete guarantee that you will reap the benefits if you provide authentic documents and statements. Emsigner GST is the perfect way to input your digital signature and file all your GST returns online, with ease.
There is a Provision of Limited Tax liability.
Limited tax liability is perhaps the greatest benefit of the Composition Scheme. As explained earlier, there is no fixed sum of tax that you need to pay. Your turnover may vary from one year to another. Thus, you get a chance to fix a certain rate of GST that you will pay. You can enjoy a better lifestyle and engage in free business transactions when the Government supports your commercial ideas and provides you open space for deals.
You Enjoy High Liquidity of Funds due to Low Tax Rates.
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