Request a demo

Thank you for your response

Our representative will get in touch with you shortly.

Composition Scheme Rules under GST

Updated on:  

08 min read

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.

Latest Updates

28th May 2021
As per the outcome of the 43rd GST Council meeting and CBIC notification,
(1) Interest relief has been provided for filing of CMP-08 for Jan-March 2021 quarter as per which, for any delay, interest is not charged until 3rd May, whereas 9% of reduced interest will be charged if filing is done thereafter until 17th June, and 18% later on.
(2) The due date to file GSTR-4 for FY 2020-21 is extended up to 31st July 2021.
(3) The maximum late fee for GSTR-4 that can be charged will be restricted to Rs.500 per return for nil filing and Rs. 2000 for other than nil filing.

1st May 2021
(1) The due date to file GSTR-4 for FY 2020-21 was extended from 30th April 2021 to 31st May 2021.
(2) Form CMP-08 that was due by 18th April 2021 for January-March 2021 has been given a relaxation in the interest charges. No interest for filing on or before 8th May, interest reduced to 9% between 9th May and 23rd May, but charged at 18% thereafter.
(3) The time limit to file ITC-03 by newly opted composition taxable persons for FY 2021-22 is extended up to 31st May 2021.

21st September 2020
The late fee has been reduced on filing pending Form GSTR-4 (Quarterly Return). The taxpayer is not required to pay the late fee if the tax liability is ‘NIL’. For other cases, the late fee has been restricted to Rs.500.

However, the pending GSTR-4 (quarterly) related to FY 2017-18 and 2018-19 has to be filed on or before 31.10.2020.

31st August 2020
The due date for furnishing Form GSTR-4 for the FY 2019-20 from 31st August 2020 to 31st October 2020.

21st July 2020
The facility to file GSTR-4 (Annual Return) is now available on GST portal.

13th July 2020
The due date to file GSTR-4 (Annual Return) has been extended to 31st August 2020 from 15th July 2020.

3rd April 2020
1. The time limit to opt into the composition scheme for the FY 2020-21 in form CMP-02 has been extended up to 30th June 2020. It applies for both taxpayers registered under section 10 of the CGST Act as well as the taxpayers opting for the scheme notified via CGST (Rate) notification no. 2/2019 dated 7th March 2019.
2. The time limit to file form ITC-03 has accordingly been extended till 31st July 2020.
3. The dealers can submit challan-cum-statement in form CMP-08 for the January-March 2020 quarter by 7th July 2020.
4. The time limit to file GSTR-4 annual returns for the FY 2019-20 by the composition dealers has been extended till 15th July 2020.

Intimation and Effective date for Composition Levy

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:

  • Will not collect taxes
  • Issue bill of supply for supplies FORM GST CMP- 03* must also be filed within 60 days of the exercise of option:
    • Details of stock
    • Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of option

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.

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:

  • Intimation in FORM GST CMP- 02 for exercise option**
  • 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  

Effective date for composition levy

  • 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
  • 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.

Conditions and Restrictions for Composition Levy

  • The person opting for the scheme must neither be a casual taxable person nor a non-resident taxable person.
  • 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
Composition Scheme Rules under GST
Composition Scheme Rules under GST
  • Where the taxpayers deal with unregistered person, tax must be paid or no stock must be held
  • Mandatory display of invoices of the words ” composition taxable person, not eligible to collect tax on supplies”
  • Mandatory display of the words “Composition Taxable Person” on every notice and signboard displayed at a prominent place.
  • He is not a manufacturer of such goods as may be notified by the Government during the preceding financial year.

Validity of Composition Levy

Composition Scheme Rules under GST

It depends on the fulfilment 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.

Rate of Tax

composition scheme rate

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

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 RequiredPurposeDue Date
Form GST CMP-01To 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-02Intimation of willingness to opt into the scheme for GST registered normal taxpayersPrior to commencement of Financial Year
Form GST CMP-03Details of stock and inward supplies from registered and unregistered  personsWithin 90 days of the exercise of the option
Form GST CMP-04Intimation of withdrawal from the schemeWithin 7 days of the occurrence of the event
Form GST CMP-05Show cause notice on contravention of Rules or Act by a proper officerOn any contravention
Form GST CMP-06Reply to show cause noticeWithin 15 days
Form GST CMP-07Issue of OrderWithin 30 days
Form GST REG-01Registration under Composition schemePrior to the appointed date
Form GST ITC-01Details of inputs in stocks, semi-finished and finished goods30 days of withdrawing option
Form GST ITC-03Intimation of ITC availableWithin 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.

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 downloadable format (PDF) prescribed by the government for registering as a composition dealer.

Intimation to pay tax under Section 10

inline CTA
India’s Fastest and Most Advanced 2B Matching
Maximise ITC claims, use smart validations to correct your data and complete 2B matching in <1 minute