Composite Scheme under GST for FY 2022-2023 With Limit

Introduction: If you are New to GST then this is what you should know about the composite scheme under GST. The scheme is termed a composition scheme under GST law. The word composite scheme itself states that it is a “scheme ” under GST for small taxpayers.

image for composition scheme under gst

Main Topics:

The Composite scheme under GST is a very simple scheme for small taxpayers in India.  Also, it is a hassle-free compliance scheme, voluntary and optional scheme available to the taxpayers as per the choice.

The scheme is optional because one can choose, whether to pay tax under the composite scheme or not.  There are many benefits of the composition scheme in GST.  The composition scheme will enable taxpayers to compete with big companies where price factor matters.   Let us see what are the benefits or advantages of applying for a composition scheme.

Top Benefits of composite scheme

  • Easy, simple Tax Accounting and Records maintaining system in Goods and Service Tax.
  • Easy and Simple Quarterly Return filing process.
  • The option of Quarterly payment of tax to the government.

What is the Turnover limit?

GST Provisions related to the compositee tax scheme have been provided under section 10 of the Central GST Act, 2017 and Chapter 2 of the CGST Rules, 2017.  As per this scheme, a registered taxable person, whose aggregate turnover does not exceed Rs. 1 crore (Rs. 75 lakhs for special category States except J & K and Uttrakhand) in the financial year 2016-17 may opt for this scheme.

Composition scheme limit: The Turnover limit is increased from 1 crore to 1.5crore from 01.04.2019.  This is applicable to traders, Manufacturers, and restaurant service providers.

image for composition scheme limit

Also, since 01.04.2019 they are allowed to opt for other services under composition scheme for turnover up to 50lakhs Rupees in preceding financial year with 6% Tax.

Further, A taxpayer registered under the composition tax scheme has to pay an amount equal to a certain fixed percentage of his annual turnover as a tax to the government. Composition Dealer has to pay tax on a quarterly basis rather than a monthly basis as in the case of a regular taxpayer.

Such taxpayer does not have to maintain, pre accounts and records and instead of two monthly statements and a return (which a normal taxpayer has to file under GST).   Thus, he has to file a simple quarterly return in FORM GSTR-04, and that is also online.

The Time Limits for GSTR-4 for the period of July to September 2017 was 24th December 2017.  This has a reference to the notification from government vide Notification No. 59/2017-CGST.

However, after opting for this scheme, the taxpayer cannot issue a taxable invoice under GST law and can neither collect GST from his customers nor can claim the input Tax credit on his purchases. These are the composition scheme limit under GST.

Eligibility and Conditions

There are certain rules, eligibility criteria, or conditions to apply for a composition scheme under GST.   These are the conditions a composition dealer must know before applying for a Composite scheme.

  • The aggregate turnover in the preceding financial year must be fifty lakh rupees or below for another type of service.   However, a 1.5 crore turnover scheme is also available for the supply of goods and restaurant services only.
  • The person shall pay tax under the reverse charge mechanism if he purchases goods or services under subsection 3 and 4 of section 9.
  • He should not be engaged in making any supply which is not leviable to tax under the said Act.
  • Must not be engaged in making any inter-State outward supply.
  • A person is neither a casual taxable person nor a non-resident taxable person.
  • Not engaged in making any supply through an electronic commerce operator.
  • Not making supplies of goods viz:
    • Ice cream and other edible ice, whether or not containing cocoa. (chapter 21050000)
    • Pan masala (Chapter 21069020)
    • All goods, i.e. Tobacco and manufactured tobacco substitutes(Chapter 24)
  • Not eligible to take the input tax credit
  • Shall not collect tax from the recipient of goods or services.
  • He needs to issue a bill of supply instead of tax invoice
  • He shall mention the following words at the top of the bill of supply: “Taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.

Restrictions for Goods

The supplier of the below items is not eligible to avail composite scheme in GST. This has reference to CGST Notification no. 14/2019–Central Tax dt.07.03.09 and No.43/2019-Central Tax dt.30.09.2019.

2105 00 00Ice cream and other edible ice, whether or not containing cocoa.
2106 90 20Pan masala.
24All goods, i.e. Tobacco and manufactured tobacco substitutes
2202 10 10 Aerated Water

What is the GST rate for the composite scheme?

The GST rate for the composition scheme in GST for dealers is classified as below. This includes a turnover of up to 1.5 crore and 50 lakhs.

Composition scheme GST Rate Chart

Type of SupplierRate of Tax (CGST + SGST)
Traders, Manufacturer 1% of Turnover
The registered persons who make a supply of food, or any drink, or any other article for human consumption (other than alcoholic liquor for human consumption). This may include services provided by Restaurants or Hotels. 5% of Turnover
The registered person who makes the First supply of goods or services or both up to an aggregate turnover of fifty lakh rupees made on or after 01 st day of April for any financial year. 6%

About GST Return under composite scheme

A  Composite dealer is required to make quarterly payment in form GST CMP 08. Therefore, he needs to file it by the 18th of the next month immediately after the end of that particular quarter.   Similarly, he needs to file the annual return in Form GSTR-9A by 31st December of the next financial year or as and when the government announces the dates. 

Further, the Annual Return in GSTR-4 shall be filed by 30th April following the end of such financial year.  This has a reference to notification no. 21/2019 dt.23.04.2019.

The government waives the requirement of filing GSTR 1 who could not opt for a special composition scheme under notification No. 2/2019-Central Tax (Rate). This has reference to the notification no. 12/2020-Central Tax,dt. 23-03-2020.

What is the date to apply for the composite scheme?

Turnover 1.5 crores [ For Goods and Restaurant Services only)

The last date to apply for the composite scheme For Turnover up to 1.5crore in the previous financial year is 31st March.  I.e if you want to apply for 2018-19 then you must file your application before 31st March 2019.   Thus, If you miss this date you can not opt for a composite scheme in between.

Alternate Composition Scheme

This is an alternate composite scheme under GST, applicable to the supplier of services or other mixed suppliers. In other words, this is a special composition scheme under GST. Thus, this scheme is for those composite taxpayers who are not eligible for the primary composite scheme.

Turnover Limit

One can apply for this scheme only if his previous financial year turnover is less then 50 lakh rupees.

Rate of Tax

The taxpayers who are opting for this scheme will have to pay the GST @ 6%. Thus it is a combination of 3% CGST and 3% SGST of the turnover.

Last date to apply

The last date to apply for this scheme is 31st July 2019. However, an earlier date was 30.04.2019.   Read notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 to know more about this scheme.  Also, you may read circular no. 97/2019 dt. 05.04.2019 with Corrigendum to Circular No. 97/16/2019-GST  for the above extension of the due date.

08.04.2020: The government has extended the last date to opt for a composite scheme from 31st March 2020 to 30th June 2020 For FY 2020-21. Thus, the taxpayers who wants to opt for composition scheme for FY 2020-21 shall file their FORM GST CMP-02 latest by 30th June 2020.

Further, the statement of ITC in FORM GST ITC-03 shall be filed latest by 31st July 2020. This has reference to the Notification No. 30/2020 –Central Tax dt.03.04.2020

Formula to Calculate Aggregate Turnover

Aggregate turnover shall get calculate on all India basis for a person having the same Permanent Account Number (PAN).  It is the sum of the value of all outward supplies falling in the following four categories:

  • All Taxable supplies including goods and services.
  • Also, Inclusion of Exempt supplies in the turnover
  • Exports of goods or services or both
  • Inter-state supplies, but excludes, the value of inward supplies on which tax is payable by a person on a reverse charge basis.
  • Taxes including cess paid under GST law.

CBIC vide Order No. 01/2017-Central Tax dated 13th October 2017 has clarified that a person supplying any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be ineligible for the composition scheme.

In computing his aggregate turnover in order to determine his eligibility for composition scheme, the value of supply of the exempt services including services by way of extending deposits, loans or advances shall not be taken into account.

Bill format for composition scheme

Since there are two types of composition schemes i.e 1.5crore and 50 lakh, the composition scheme bill formats are also slightly different. you may download the format as per the scheme applicable to you.

  • Bill of supply format – 1. 5Crore Turnover (Download)
  • Bill of supply format – 50 Lakh Turnover (Download)

Composition scheme for restaurants service

The GST law has made a provision of composition scheme for restaurants and hotels service providers who do not supply alcoholic liquor for human consumption. This has reference to CGST Section 10, Subsection 1 (b) and Schedule II, Para 6 (b). The supplier needs to pay a 5% total tax on the entire turnover in the state or union territory.

How to apply a composition scheme?

If you meet the above requirements, you can apply for the composition scheme only at the GST portal. Here is the step by step guide to do it:

1. Visit at URL

2. Log in to the GST Portal by entering your user name and password. If you are already not registered, then follow the GST registration steps.

3. After successful login, select ‘Application to Opt for Composition Levy’ from the Registration Menu.

4. The system will take you to the new window. It will be an Application to Opt for Composition Levy. You will see your GSTIN, Legal Name of Business, Trade Name, and Address of Principal Place of Business.

5. After that, you will see your Nature of business and Jurisdiction.

6. Click to select the Composition Declaration to abide by the conditions and restrictions for Taxpayers under the Composition scheme.

7. You must also check the box for Verification (below the Composition Declaration).

8. Click to select the Authorized Signatory from the dropdown menu and enter your Place.

9. After selecting the Authorized Signatory and the Place, you will see the option to submit the form. Select the mode of signing the application. You may sign it by DSC, E-sign, or EVC and click the submit option.

10. After a successful signing and submission, the system will perform data validation. After successful validation, you will get your ARN for the work item. Also, you will receive it via e-mail and SMS within the next 15 minutes.

How to switch composition to regular?

There may be various reasons to convert from composition to regular under GST. The first reason can be, as soon as you cross the composition scheme turnover limit, you must turn to a regular taxpayer. Thus, you can switch from composition to regular at any point of time during the financial year.

Here is how to change the composition scheme to a regular in GST and pay the regular tax.

1. Visit website

2. Login to the GST Portal with your valid credentials.

3. Click on the Services > Registration > Application for Withdrawal from Composition Levy.

4. Choose to select the Date from which withdrawal from Composition Levy is Required.  

5. Select your Reason for withdrawal from Composition Levy from the list.

6. Select to click the Verification checkbox.

7. Choose the Name of Authorized Signatory from the drop-down list

8. Enter the place

9. Click on the SAVE button to save the application data.

After filling all the necessary data in the application, you need to digitally sign the application through DSC or EVC. After filing the application you will see the success message.

Also, you will receive an acknowledgment in 15 minutes’ time on your registered e-mail address and mobile phone number.

Further, you will receive an Application Reference Number (ARN) receipt on your e-mail address and mobile phone number.

Once you file the application to withdraw from the Composition scheme, it will be auto-approved. Thus will be taken out of the Composition Levy immediately.

Further, you can go to My Profile and check that your Taxpayer Type is now changed to Regular from Composition scheme. Thus, you will have access to all the GST returns applicable to a Regular taxpayer.

How to change regular to composition?

One can not change regular to a composition scheme in between of Financial year. You may see our above article “What is the date to apply for the composition scheme”.

Thus, you can switch from a regular scheme to a composite scheme only when you meet the above time period.

Further, if your previous year turnover is less than, the above composite scheme turnover limit set, on the date of your application, then you can apply for a fresh composite scheme in GST.

Thus, you can apply for the composition scheme before the commencement of the financial year or the stipulated date fixed by the government.

Updates on the composite scheme for service providers

Composition Scheme with 50 Lakh Turnover

Here are the latest updates on the composite scheme for service providers in India. The government has notified another scheme for composite dealers who deals in the supply of other types of goods or services. As per this scheme composite dealers can apply for any other type of supply of service or goods except mentioned in ANNEXURE vide notification no. 02/2019 dt. 07.03.2019 or mentioned under section 10.

As per the 1.5 crore turnover scheme only Restaurant and hotel providers were able to apply the scheme. However, now under the 50 lakh turnover scheme more types of service providers can apply for the composition scheme. Thus, the condition for this scheme is that one can make a supply of goods or services or both up to the turnover of 50 lakhs rupees in any financial year. Once you cross this limit you need to register as a normal taxpayer.

Composition Scheme Q & A

How to change the composite scheme to regular in GST?

1. Withdraw from Composition Scheme by Navigating to Services > Registration > Application for Withdrawal from Composition Levy on the GST portal.
2. Apply for Regular GST Registration

How to opt for the composition scheme in GST for 2022-23?

1.Log into GST Portal
2. Go to Services > Registration > Application to Opt for Composite Levy
3. Fill the form as per the form specification rules and submit

What is the composition scheme in Hindi?

जीएसटी कानून के तहत कंपोजिशन स्कीम छोटे व्यवसायों के लिए है। छोटे व्यवसायों को राहत पहुंचाने के लिए शुरू की गई योजना ताकि उन्हें कानून के तहत अनुपालन प्रावधानों का बोझ न पड़े। साथ ही, करदाता को इस योजना के तहत कर का बहुत कम हिस्सा सरकार को देना होगा।

Who can opt composition scheme?

The persons whose aggregate turnover in the previous financial year was fifty lakh rupees or below can apply for the composite scheme. Read more..

Is a composite scheme available for service providers?

yes, from FY 2019-20 the composite scheme is available for service providers.

Can I opt for composite scheme now?

You need to file an application to opt for a Composition scheme at GST Portal prior to the commencement of the financial year.

Due date to opt for composition scheme for FY 2022-2023

The taxpayer has to file the application on or before 31st March 2022 to opt for the composition scheme for FY 2022-2023. more

Top twenty Q & A on Composition Scheme

There will be a lot of questions arising in the taxpayer’s mind when it comes to composition schemes under GST. Thus, we have tried here to answer some more questions related to this scheme. more

Composition scheme for Restaurants & Hotel

The new composition scheme in GST subsuming the service tax and value-added tax (VAT) charged at restaurants. Hence, the air-conditioned restaurants attract GST at the rate of 18 percent on major food bills. more

2022 FAQ On Composition Scheme

The top 7 faq section covers the latest questions and answers on the composition scheme in 2022. It includes how to convert from regular to composition scheme?. more

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