Composition Scheme Rules under GST

As an Indian small or medium business owner, it's important to be aware of the Composition Scheme Rules under GST. These rules apply to businesses with a turnover of less than Rs. 1.5 crores. If your business qualifies, you can pay a fixed percentage of your turnover as GST, rather than the regular GST rate.

Composition Scheme Eligibility Criteria

Not all businesses are eligible for the Composition Scheme under GST. Here are the eligibility criteria:

Your turnover should be less than Rs. 1.5 crores
Your business should not engage in inter-state supplies of goods or services
You cannot supply goods or services through an e-commerce operator who is required to collect tax under Section 52 of the CGST Act
You cannot supply non-taxable or exempt goods or services

Advantages of the Composition Scheme

The Composition Scheme has several advantages for small or medium business owners. Here are some of them:

Simplified compliance: Under the Composition Scheme, you are required to file quarterly returns instead of monthly returns.
Lower tax rate: The GST rate applicable under the Composition Scheme is lower than the regular GST rate. For manufacturers and traders, it is 1%, and for restaurants, it is 5%.
No input tax credit: You cannot claim input tax credit under the Composition Scheme.

Disadvantages of the Composition Scheme

While the Composition Scheme has several advantages, it also has some disadvantages. Here are some of them:

Cannot collect tax from customers: If you are registered under the Composition Scheme, you cannot collect tax from your customers. This means that you have to bear the tax liability yourself.
Cannot supply inter-state: If you are registered under the Composition Scheme, you cannot supply goods or services to customers in other states.
Cannot supply exempt or non-taxable goods or services: Under the Composition Scheme, you cannot supply goods or services that are exempt or non-taxable.

How to Opt for the Composition Scheme

If your business meets the eligibility criteria for the Composition Scheme, you can opt for it by filing Form GST CMP-02. You need to file this form at the beginning of the financial year or at the time of registration under GST.

Conclusion

The Composition Scheme under GST is a beneficial option for small or medium business owners. It offers simplified compliance and a lower tax rate. However, it also has some disadvantages, such as restrictions on inter-state supply and non-eligibility for input tax credit. If your business meets the eligibility criteria, you should consider opting for the Composition Scheme to ease your compliance burden and reduce your tax liability.