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Composition Scheme Rules under GST provide for all the procedural compliance w.r.t. intimation for Composition Scheme, the effective date for levy, conditions, and restrictions on the levy, validity of levy and rate of tax.

A. Intimation and Effective date for Composition Levy

1. For persons already registered under pre-GST regime

Any person being granted registration on a provisional basis (registered under VAT Act, Service Tax, Central Excise laws etc) and who opts for Composition Levy shall electronically file an intimation in FORM GST CMP-01, duly signed, before or within 30 days of the appointed date. If intimation is filed after the appointed day, the registered person:

a) Will not collect taxes

b)  Issue bill of supply for supplies

FORM GST CMP- 03* must also be filed within 60 days of the exercise of option:

a) Details of stock

b) Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of option

2. For persons who applied for fresh register under GST to opt scheme

For fresh registration under the scheme, intimation in FORM GST REG- 01 must be filed.

Latest Update!

7th March 2019

The CBIC has issued a notification increasing the upper limit of annual aggregate turnover (for the previous financial year) to opt into the composition scheme from Rs 1 crore to Rs 1.5 crores. However, the limit remains Rs 75 lakhs for N.E states & Uttarakhand!

The notification comes into effect from 1st April 2019.

Attention GST registered taxpayers! 31st March 2019 is the deadline to opt into Composition for FY 2019-20

For: Any GST registered taxpayer who want to opt for the Composition scheme for FY 2019-20;

31st March 2019 is the deadline to file the intimation in Form GST CMP-02 to opt into composition scheme for the FY 2019-20.

Follow our Step-by-step Guide to file CMP-02

Also, furnish statement in form ITC-03 within 60 days of commencement of the FY 2019-20 to declare the ITC claim that has to be reversed on inputs/capital goods in stock, in semi-finished or in finished goods.

3. Registered under GST and person switches to Composition Scheme

Every registered person under GST and opts to pay taxes under Composition Scheme, must follow the following:

a) Intimation in FORM GST CMP- 02 for exercise option**

b) Statement in FORM GST ITC- 3 for details of ITC relating to inputs lying in stock, inputs contained in semi-finished or finished goods within 60 days of commencement of the relevant financial year

 

B. Effective date for composition levy

a) The option to pay tax under Composition Scheme shall be effective:

  • For persons already registered under pre-GST regime: Appointed Day
  • Registered under GST and person switches to Composition Scheme: Filing of Intimation

b) For persons who applied for fresh register under GST to opt scheme

Option to pay tax under Composition Scheme shall be effective from:

  • where the application for registration has been submitted within thirty days from the day he becomes liable for registration, such date.
  • In the above case, the effective date of registration shall be the date of grant of registration.

C. Conditions and Restrictions for Composition Levy

  1. The person opting for the scheme must neither be a casual taxable person nor a non-resident taxable person.
  2. The goods held by him in stock on the appointed date must not be purchased from a place outside his state. The goods should therefore not be classified as:
  • Interstate purchase
  • Imported Goods
  • Branch situated outside the State
  • Agents or Principal situated outside the State

3. Where the taxpayers deal with unregistered person, tax must be paid or no stock must be held

Composition Scheme Rules under GST
5. Mandatory display of invoices of the words ” composition taxable person, not eligible to collect tax on supplies”

6. Mandatory display of the words “Composition Taxable Person” on every notice and signboard displayed at a prominent place.Composition Scheme Rules under GST7. He is not a manufacturer of such goods as may be notified by the Government during the preceding financial year.

 

D. Validity of Composition Levy

It depends on the fulfillment of conditions (discussed above), however, an eligible person for scheme may also opt out of the scheme by filing an application. In case Proper Officer has reasons to believe that taxpayer is not eligible for the scheme or contravened any Rules or ACT, he may issue show cause notice followed by an order denying the entailment of the scheme.
Composition Scheme Rules under GST

E. Rate of Tax

The rate of tax o prescribed for different categories of registered persons have been described below:

composition scheme rate

F. Composition Scheme Rules under GST- Compliance

Composition Scheme Rules under GST provides for submission of different forms meant for respective purposes followed by due date for submission of such forms, which are as follows:

 

Form Required Purpose Due Date
Form GST CMP-01 To opt into the scheme by provisional GST registration holder(from VAT regime) Prior to appointed date or within 30 days of the said date
Form GST CMP-02 Intimation of willingness to opt into the scheme for GST registered normal taxpayers Prior to commencement of Financial Year
Form GST CMP-03 Details of stock and inward supplies from registered and unregistered  persons Within 90 days of the exercise of the option
Form GST CMP-04 Intimation of withdrawal from the scheme Within 7 days of the occurrence of the event
Form GST CMP-05 Show cause notice on contravention of Rules or Act by a proper officer On any contravention
Form GST CMP-06 Reply to show cause notice Within 15 days
Form GST CMP-07 Issue of Order Within 30 days
Form GST REG-01 Registration under Composition scheme Prior to the appointed date
Form GST ITC-01 Details of inputs in stocks, semi-finished and finished goods 30 days of withdrawing option
Form GST ITC-03 Intimation of ITC available Within 60 days of commencement of the financial year

 

 

All the above-mentioned forms must be duly signed and filed electronically on Common Portal, either directly or through a Facilitation Centre notified by the Commissioner.

G. Conclusion

Any person who opts for the scheme will be deemed to have been opted for all the places of business having the same registered PAN. Hence, you may not choose any one of all the place of business to be registered under the scheme.

Composition Scheme Rules under GST have been targeted to be strict and crisp for the persons availing the Composition Scheme.

To know more about Composition Scheme, its benefits, and drawbacks, and Transition Provisions for your business, do read through our other articles.

Below is the format (in a PDF format) prescribed by the government for registering as a composition dealer.

Intimation to pay tax under Section 10

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