Composition Scheme of GST


Who is composition Supplier?

  • A Composition supplier is a person registered under section 10 of CGST Act 2017
  • Pays 1% GST on his total sales (Example if sales is Rs. 5,00,000, GST payable is Rs. 5,000 (being 1% of sales)
  • Total sales by the supplier in a financial year should be less than Rs. 1.5 crore (If Trader or manufacturer) Rs. 75 Lakhs (If supplier is in North-eastern states and Himachal Pradesh) Rs. 50 lakh (if supplier is a service provider)
  • Input tax credit in cash of composition scheme is not allowed
  • Must mention composition taxable person on invoices
Note: If supplier is a Restaurant owner (not serving alcohol) than rate of GST is 5% instead of 1%
Benefits of Composition Scheme
  • No burden of maintaining hectic business records, accounts or sale and purchase records
  • Pay 1% of GST of total sales and be free of all compliance burdens or mismatched reports of GSTR 2A
  • Pay taxes quarterly, no need to pay on monthly basis (However regular supplier can opt for QRMP Scheme and file return quarterly)
Disadvantages of Composition Scheme
  • No benefit of Input tax credit
  • Since no benefit of ITC, You are basically paying out of own pockets
  • Even if the sales for the month are less than purchase still the GST will be paid
  • No business through e-commerce portal
  • No trading outside the state of registration (No interstate supplies)
  • Not suitable for New Business which requires heavy investment in inventory
Should I opt for Composition Scheme?
Go for Composition Scheme if
  • You don’t want to keep records of any kind, No invoices, no sales or purchase records
  • You want to keep your tax liability limited
  • No sales outside the state
Don’t go for Composition Scheme if
  • You do not want to pay 1% of Tax out of pocket since GST cannot be collected from customer
  • Business is a start up which requires heavy amount of investment in inventory.
  • Goods are to be sold outside state (Interstate Supply)
  • Turnover is more than Rs. 1.5 Crores
  • Customer pays the GST

To know more about composition scheme Click Here
To register yourself visit GST Portal or contact us and we can get it done for you

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