Log In Sign Up

FREE GST Billing & Return Filing at ClearTax GST

File GST Returns
Create GST Bills

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 file an intimation in FORM GST CMP-01, duly signed, before or within 30 days of 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 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.

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

 

**As per Notification No. 45/2017 – Central Tax dated 13th October 2017

  • The composition scheme will be applicable from the 1st day of the next month. Eg: If a registered taxpayer submits the form on 15th Oct then composition scheme will apply from 1st Nov.
  • Option to opt for composition scheme as been extended to 31st Mar 2018.
  • FORM GST ITC-03 must be submitted within 90 days from the date of composition levy (1st Nov as per example)
  •  TRAN-1 must be filed before FORM GST ITC-03 has been furnished.
  • If the registered person opts to pay tax under composition scheme effect from the first day of a month which is not the first month of a quarter (like 1st Nov in our example) then he will file GSTR-4 return for that quarter (in our example Oct-Dec). For previous quarters before composition scheme (Jul-Sep) he must file the normal returns.

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 prescribed for different categories of registered persons have been described below:

Capture

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:

Composition Scheme Rules under GST 2

 

All the aabove-mentionedforms 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

Simplify Your GST Filing & Invoicing

Get Trained & Try Cleartax GST Software for FREE

Start Free GST Software Trial & Training

Simplify Your GST Filing & Invoicing

Get Trained & Try Cleartax GST Software for FREE

Use GST Software