The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 1.5 crore (Rs. 75 lakh for *special category states except for Assam, Himachal Pradesh, and J&K), and in the case of services, turnover is up to Rs. 50 lakhs in the preceding financial year. The objective of the composition scheme is to bring simplicity and reduce the compliance cost for the small taxpayers.
*The Special Category States are
- Arunachal Pradesh
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Uttarakhand
Who Cannot Opt for Composition Scheme
The following people cannot opt for the scheme:
- Manufacturer of ice cream, pan masala, or tobacco
- A person making inter-state supplies
- A casual taxable person or a non-resident taxable person
- Businesses that supply goods through an e-commerce operator
Conditions & Restrictions for GST Composition Levy
- He is neither a casual taxable person nor a non-resident taxable person.
- The goods held in stock by him on the appointed day have not been purchased in the course of inter-state trade or commerce or imported from a place outside India.
- He shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both.
- He was not engaged in the manufacture of goods as notified under clause (e) of sub-section (1) of section 10, during the preceding financial year.
- He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him.
- He shall mention the words “composition taxable person” on every notice or signboard d displayed at a prominent place at his principal place of business and at every additional place or place.
Composition Rate of Tax
| Serial No. | Category of Registered Person | Rate of CGST | Rate of SGST | Total |
|---|---|---|---|---|
| (a) | Manufacturers other than manufacturers of such goods as may be notified by the Government | 0.5% | 0.5% | 1% |
| (b) | Restaurant services and Outdoor catering services (not serving alcohol) | 2.5% | 2.5% | 5% |
| (c) | Any other supplier eligible for composition levy (section 10) | 0.5% | 0.5% | 1% |
| (d) | For services | 3% | 3% | 6% |
A registered person opting for a composition scheme for goods is allowed to supply services (other than restaurant services) along with a supply of goods or supply of restaurant services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union Territory or Rs. 5 lakhs whichever is higher.
Important Notes for Composition Dealers
- No Input Tax Credit (ITC) will be made available to the composition levy of tax. Composition dealers cannot make interstate sales.
- Composition dealers are not required to maintain detailed records. Composition dealers cannot issue Tax Invoices.
- Composition dealers cannot charge taxes to their customers. They should pay tax out of their own pocket.
- Composition dealers must issue a Bill of Supply instead of Tax Invoice and should mention “composition taxable person” not eligible to collect tax on supplies on top of a Bill of supply.
GST Composition Returns
| Serial No. | Returns to be filed | Due date for filing of return |
|---|---|---|
| (a) | CMP 08 (Quarterly return) | 18th of the month after the end of the quarter |
| (b) | GSTR – 4 (Annual return) | Within 30th April of the succeeding year |
