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What is GST COMPOSITION SCHEME?

What to know about GST Composition Scheme

The Composition Scheme is a GST scheme that allows small businesses to pay tax at a lower rate and reduce their compliance burden. Under this scheme, businesses with an annual turnover of up to Rs. 1.5 crore (Rs. 75 lakh for businesses in some states) can pay a fixed percentage of their turnover as GST instead of the regular GST rate.

The tax rate for businesses registered under the Composition Scheme is 1% for manufacturers and traders, 2% for restaurants, and 5% for businesses engaged in providing services. Additionally, businesses under this scheme are not required to maintain detailed records of their sales and purchases or file regular GST returns. Instead, they need to file a quarterly return called GSTR-4 that contains summary details of their sales and tax payable.

However, businesses under the Composition Scheme are not eligible to claim input tax credit on their purchases, and they cannot collect GST from their customers. This means that they have to bear the GST cost on their purchases and cannot pass it on to their customers.

The Composition Scheme is a voluntary scheme, and businesses can opt-in or opt-out of the scheme at any time. However, once a business opts-in, it is required to remain under the scheme for at least one financial year.

The Composition Scheme is beneficial for small businesses as it reduces their compliance burden and provides a simple tax structure. However, businesses should carefully evaluate their eligibility and the pros and cons of the scheme before opting-in. It is always recommended to consult with a tax professional or GST service provider before making any decision.

What are some benefits of GST Composition Scheme?

 

The GST Composition Scheme in India offers several advantages for small businesses. Here are some of the key advantages of the Composition Scheme:

  1. Lower Tax Rate: Businesses registered under the Composition Scheme can pay a lower rate of tax compared to the regular GST rate. The tax rates under the Composition Scheme are 1% for manufacturers and traders, 2% for restaurants, and 5% for businesses engaged in providing services.

  2. Reduced Compliance Burden: Businesses under the Composition Scheme are not required to maintain detailed records of their sales and purchases or file regular GST returns. Instead, they need to file a quarterly return called GSTR-4 that contains summary details of their sales and tax payable. This reduces the compliance burden and makes the tax structure simpler for small businesses.

  3. Cash Flow Benefit: Since the tax liability under the Composition Scheme is fixed at a percentage of turnover, businesses can plan their cash flow better and avoid the cash flow issues that may arise due to the fluctuating tax liability under the regular GST regime.

  4. Easy to Administer: The Composition Scheme is easy to administer for small businesses as it requires less documentation and record-keeping.

  5. Competitive Advantage: The lower tax rates and reduced compliance burden can give small businesses a competitive advantage over their larger counterparts and help them expand their business.

  6. Eligibility for E-Commerce: Small businesses registered under the Composition Scheme can also sell their goods or services through e-commerce platforms such as Amazon, Flipkart, etc. This can help them reach a wider audience and increase their sales.

It is important to note that the Composition Scheme is only suitable for small businesses with a turnover of up to Rs. 1.5 crore (Rs. 75 lakh for businesses in some states) and certain restrictions apply. Therefore, businesses should carefully evaluate their eligibility and the pros and cons of the scheme before opting-in. It is always recommended to consult with a tax professional or GST service provider before making any decision.

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Documents required FOR GST composition scheme

List of Documents Required

The documents required for registering under the GST Composition Scheme are:

  1. PAN Card: PAN Card is mandatory for all businesses to register under the GST Composition Scheme.

  2. Aadhaar Card: Aadhaar Card is required for the sole proprietor or the authorized signatory of the business.

  3. Bank Account Details: A canceled cheque or bank statement is required to provide the bank account details of the business.

  4. Business Address Proof: Any of the following documents can be submitted as proof of business address: electricity bill, property tax receipt, rent agreement or lease agreement.

  5. Identity and Address Proof of Proprietor/Partners/Director: Identity proof (such as Aadhaar card, voter ID card, passport, etc.) and address proof (such as driving license, passport, etc.) of the proprietor, partners, or directors of the business.

  6. Photographs: Passport size photographs of the proprietor, partners, or directors of the business.

In addition to the above documents, businesses may also be required to provide additional documents such as:

  1. GST Payment Challan or Form GST CMP-02 (for new registration under the Composition Scheme)

  2. Form GST CMP-03 (for opting out of the Composition Scheme)

  3. GST Returns (if the business was previously registered under the regular GST regime)

It is important to note that the documents required may vary based on the type of business and the state where it is registered. Therefore, businesses should consult with a tax professional or GST service provider to confirm the exact documentation requirements.

BASIC

Suitable for Basic Process Outsourcing
₨999
₨ 499 + GST
  • GSTR-9A
  • GST-CMP-08
  • SALES RECORDS IN EXCEL
  • LEDGER ACCOUNTS
  • ACC. RECONCILIATION
  • BANK RECONCILIATION
  • DEDICATED ACCOUNT MANAGER
  • ACCOUNTS RECEIVABLE & PAYABLE
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**Pricing Mentioned Above Is Based on Monthly Basis

ADVANCE

Suitable for Businesses
₨1999
₨ 999 + GST
  • GST-CMP-08
  • GSTR-9A
  • LEDGER ACCOUNTS
  • ACC. RECONCILIATION
  • BANK RECONCILIATION
  • SALES RECORDS IN EXCEL
  • ACCOUNTS RECEIVABLE & PAYABLE
  • DEDICATED ACCOUNT MANAGER
CLICK TO PAY
**Pricing Mentioned Above Is Based on Monthly Basis

PROFESSIONAL

Suitable for Businesses
₨2499
₨ 1299 + GST
  • GST-CMP-08
  • GSTR-9A
  • LEDGER ACCOUNTS
  • ACC. RECONCILIATION
  • BANK RECONCILIATION
  • SALES RECORDS IN EXCEL
  • DEDICATED ACCOUNT MANAGER
  • ACCOUNTS RECEIVABLE & PAYABLE
CLICK TO PAY
**Pricing Mentioned Above Is Based on Monthly Basis
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