Rajat Negi

You can’t avoid Composite Scheme and its benefits

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Ensure that the tax systems’ statutory provisions are followed. Small firms find it incredibly difficult to comply with such legal requirements. The composition plan was adopted by the government as part of the GST. For small taxpayers, this is a convenient solution to bypass many GST requirements. This strategy is optional and voluntary.

Conditions for joining the composite scheme have been established.

  • If you choose the composite scheme levy, you must be a registered person.
  • The individual cannot be a non-resident taxable person or a casual taxable person.
  • The registered person’s total turnover in the previous financial year should not exceed Rs. 1.5 crore (for commodities) and Rs. 50 lakhs (for services).
  • A merchant should not make interstate deliveries or sell items that are excluded from the GST scheme.
  • Under the composite arrangement, a dealer cannot claim ITC (Input tax credit).
  • Every notice or signboard placed at the location of the business must include the words “Composition taxable person.” as well as on every invoice he sends out to consumers.
  • Under the reverse charge system, the taxpayer is required to pay tax at regular rates on transactions.
  • A maker of ice cream, pan masala, or tobacco, or a firm that provides items through an e-commerce operator, should not participate in the plan.

Should I opt for a composite scheme?

A dealer who is not currently enrolled in the composite scheme can join it only at the start of the following fiscal year.

  • The application must be submitted on or before March 31st of the prior year.
  • A taxpayer must file GST CMP-02 with the government to enroll in the composition scheme. By logging into the GST site, you may do so.
  • A dealer that wishes to participate in the composite scheme must submit notice at the start of each fiscal year.
  • If a dealer is on the composite scheme, they may be allowed to move to the conventional plan at any time throughout the year. They cannot, however, go back to the composite plan during the same fiscal year.
  • If a dealer wants to opt-out of the plan, he must fill out the GST CMP-04 form. He must additionally file form GST ITC-01 on top of that.

Within 30 days of receiving notice of the withdrawal option, provide information on the stock intake, semi-finished and finished items.

GST rates under the composite scheme

  • Manufacturer and trader of Goods = 1% 
  • Restaurants not serving alcohol for human consumption = 5%
  • Other Service Providers = 6%

The composite scheme has been made accessible to service providers with annual revenue of up to Rs. 50 lakhs as of April 1, 2019.

GST returns under composite scheme

Compliance is easier and more flexible for a dealer under the composite system. In contrast to regular taxpayers who file their GST returns every month, composite scheme taxpayers were required to file a GST return called GSTR-4 every quarter. The government has recently simplified the criteria, even more, notifying that GSTR-4 must now be completed yearly by the 30th of April of the following financial year, with tax payments made quarterly.

Terminologies associated with Composite scheme

  • GST CMP-01 = Provisional GST registration holders can join the scheme if they choose to (from the VAT regime)
  • GST  CMP-02 = to enroll in the scheme for regular taxpayers who are GST registered.
  • GST CMP-03 = stock information and inbound supplies from unregistered sources.
  • GST CMP-04 = notification of withdrawal from the plan.
  • GST CMP-05 = A competent official may issue a show-cause notice for a violation of the rules or an act.
  • GST CMP-06= a response to the show-cause notice.
  • GST CMP-07 = Issue of order
  • Form GST REG-01 = registration under composite scheme.
  • Form GST ITC-01 = details of input in stocks, semi-finished and finished goods.
  • Form GST ITC-03 = Intimation of ITC available. 

Final Words

You can go for a composite scheme when your business is in the infant stage and later you can switch to a regular scheme. 

I hope, I gave you some insights about the composite scheme under GST and startup and delivered it in the best possible way. 

If you have any queries related to the same then do leave a comment, and I will respond to it. 

DO SHARE THIS ARTICLE with your friends or family.  You can tweet out your thoughts by tagging me @rajatinr on Twitter.

To your Success

-Rajat Negi, Logging Out 🤗

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Rajat Negi

Compound Investor (Who loves to talk to stock)
Digital Marketer (Who loves to make brands)

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