Latest GST Composition Scheme – Sec 10 – Simplified

As per Section 10 of the CGST Act, 2017, the GST Composition scheme is an alternate method to pay tax for small businesses without the hassles of ITC and at lower rates than the rates under the normal tax scheme. It is an optional scheme for small businesses. GST Composition scheme is PAN based and the eligibility for availing this scheme depends on the aggregate turnover on the same PAN.

Basic Features of the GST Composition Scheme

Before opting for the GST Composition scheme, the supplier must understand the specifics of this alternate method of paying tax for small business:-

• All registrations under the same PAN will have to either opt for the GST Composition scheme or continue in the regular scheme.
• The supplier cannot avail ITC in this scheme. Moreover, the composition dealer cannot charge any tax from the customer and the composite tax paid by him will not be available as input tax for the buyer and thus the buyer will not be eligible for ITC.
• The composition dealer cannot issue a tax invoice. The supplier has to issue a Bill of supply.
• If any inward supply is taken attracting the provisions of Reverse charge mechanism (RCM), then the composite rates of GST will not be applicable.
• The composite dealer will have to file quarterly returns and payments in Form GST CMP – 08 by 18^th of the next month succeeding such quarter. An annual return in Form GSTR – 4 will also have to be filed.

Who is eligible for availing the GST Composition Scheme?

The following category of persons can avail the GST Composition scheme:-

1. Manufacturers and traders of goods
2. Restaurants (Not serving alcohol)
3. Earlier the GST Composition scheme was only for suppliers of goods, however, in the 32^nd Council Meeting notified under Notification No. 2/2019 dated 7^th March, 2019, the scheme has also been made available to service providers from 1^st April, 2019.

Composition Scheme – GST Rate

The GST rates for the composition scheme are as under:-

Eligible Person	Total rate of tax (CGST + SGST/UT-GST)	Turnover
Manufacturer	1%	All supplies with the state – Both taxable and exempted.
Restaurants not serving alcohol	5%	All supplies with the state – Both taxable and exempted.
Other Suppliers of goods	1%	Taxable turnover within the state.
Service Providers	6%	All supplies with the state – Both taxable and exempted.

GST Composition Scheme Turnover Limit

Since the intent of the scheme is to benefit the small businesses from tedious GST compliances, the eligibility for availing the scheme is based on the aggregate turnover under the same PAN.

For suppliers of goods – If the aggregate turnover is upto Rs. 1.50 crores for the preceding financial year, the person will be eligible for availing the GST composition scheme. However, for North-Eastern states and Uttarakhand, this threshold limit is Rs. 75 lakhs.

For suppliers of services – If the aggregate turnover is upto Rs. 50 lacs for the preceding financial year, the person will be eligible for availing the GST composition scheme.

Section 10(2) – Persons not eligible to opt for GST composition scheme

As per Section 10(2) of the CGST Act, 2017, the following categories of persons are not eligible to opt for GST composition scheme even if the aggregate turnover is below Rs. 1.50 crores/Rs. 75 lacs :-

• Person making supply of any service OTHER THAN –
  • Restaurant services
  • Interest received on extending deposit loan and advances shall be ignored completely
  • As per CGST (Amendment) Act, 2018, limited value services along with main business – Maximum value : 10% of the turnover within the state/UT or Rs. 5 lacs whichever is higher i.e. if the value of these services exceeds the maximum limit then the person is not eligible for the scheme.
• Person making supply of non-taxable goods or services
• Person making INTER-STATE supply of goods/services
• Person engaged in making supplies of tobacco, pan masala, ice cream and other edible ice, fly ash bricks and blocks, bricks of fossil fuels or similar siliceous earths, building bricks, earthen or roofing tiles [Amended by Notification No. 15/2022-CT w.e.f. 18.07.2022]
• Casual taxable person or non-resident taxable person

Earlier E-commerce operators were not eligible for availing the GST Composition scheme, however CBIC vide Notification No. 36/2023-Central Tax dated 4^th August, 2023 w.e.f. 1^st October, 2023.

E-commerce operators fulfilling the following conditions will be allowed to avail the GST Composition scheme:-

• E-commerce operator shall not allow any inter-state supply of goods through it by the said person
• E-commerce operator is collecting TCS u/s 52 of the CGST Act, 2017
• E-commerce operator shall furnish the details of supplies in Form GSTR – 8 electronically on the common portal.

Therefore, if the supplier is fulfilling the basic conditions of aggregate turnover and does not fall under the ineligible category u/ 10(2) of the CGST Act, 2017, the supplier can opt for the GST Composition Scheme.

FAQs regarding GST Composition Scheme