A Simple Guide To GST Composition Scheme For Small Taxpayers

A Simple Guide To GST Composition Scheme For Small Taxpayers

The Goods and Services Tax completely changed the indirect taxation landscape of the country. All businesses whether large or small had to get professional help from GST consulting services or individual experts to understand the features of the new law. Its implementation brought a lot of small entrepreneurs who ere earlier either ineligible or avoided paying the levies into the fold of taxation. Many of these taxpayers were worried about their profit margins decreasing because of the law and increased compliance requirements. The GST Composition scheme was launched for small businesses who could pay the tax at a fixed rate. All important information about this beneficial scheme is being presented here.

A Simple Guide To GST Composition Scheme For Small Taxpayers

Who Is Eligible For The Composition Scheme?

Until now taxpayers who had an annual turnover below Rs 1 crore were eligible for this benefit. However, in the 32nd meeting of the GST Council earlier this year, the limit was raised to Rs 1.5 crore. This change will come into effect on 1 April 2019.

Who Is Not Permitted To Avail The Scheme?

Not everyone with turnover below the threshold limit can enjoy this benefit. The law notifies that the following taxpayers qualify for this scheme:

– Businesses involved in the inter-state outward supply of goods.
– E-commerce operators who are responsible for collecting GST.
– The manufacturers of notified goods.
– Casual dealers.
– Non-Resident Foreign Taxpayers
– Tax paying person registered as Input Service Distributor (ISD)
– Anyone registered as TDS Deductor/Tax Collector

What Are The Main Features Of This Scheme?

Before approaching GST Consultants, India-based entrepreneurs must first know about the main features of this plan. The GST Composition scheme comes with a few conditions which are as follows:

  1. A composition dealer cannot claim input tax credits meaning such a taxpayer is not allowed to claim a tax reduction on a levy already paid while acquiring an input.
  2. Anyone registering under this scheme needs to present a bill of supply rather than a tax invoice to the tax agency.
  3. Such dealers have to pay taxes under the reverse charge mechanism at the normal specified rates for transactions.
  4. Anyone having different types of business registered under the same PAN must collectively register all their businesses for this plan.
  5. Taxpayers who wish to avail this scheme must voluntarily register themselves under the plan. They must remember that once their annual turnover exceeds the threshold limit, they will be transferred to the regular GST registration plan.
  6. The GST Council in its last meeting made suppliers of services as well as mixed suppliers from the unorganized sector eligible for this plan. A service provider with an annual turnover not more than Rs 50 lakhs can become a part of this scheme. Such an entity will be taxed at a rate of 6% which includes 3% CGST and the same percentage of SGST.
  7. The tax rate for manufacturers and goods traders is 1% which includes 0.5% CGST and 0.5% SGST. the applicable rate for restaurant services is 5% which contains 2.5% CGST and SGST each.

What Are The Returns That A Composition Dealer Must File?

Composite dealers paid quarterly taxes and filed returns for each quarter but the GST Council has changed the reporting requirements for such taxpayers. They need to file only one annual return now. For instance, a restaurant in Gurgaon which hired a chartered accountant for filing four times a year will now need to do so only once.


Small taxpayers can register for the GST Composition scheme through the GST portal. However, it will be better if they engage a professional GST registration consultant who will guide them for successfully completing the procedure.

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