12/29/2017 Composition Scheme - FAQ's

(/?ref=navbar_static)

File Error-Free GST Returns in Minutes

Start Your FREE Trial (https://cleartax.in/gst?ref=top-cta)

Home (/) / GST (/gst) / GST Composition Scheme (/s/gst-composition-scheme) / Composition Scheme Under GST Explained

Composition Scheme Under GST Explained

All your Queries under Composition Scheme Answered Here

Updated on Dec 12, 2017 - 11:22:47 AM

In this article, we have addressed some of the basic queries around Composition Scheme (https://cleartax.in/s/composition-scheme-under-gst/) under Goods and Services Tax Law.

Let’s look at some of the common questions around Composition Scheme that businesses should know.

1. Who can opt for Composition Scheme?

Businesses with annual turnover upto Rs 1.5 crore* can opt for composition scheme.

Turnover of all businesses with same PAN has to be added up to calculate turnover for the purpose of composition scheme.

Only Manufacturers of goods, Dealers, and Restaurants (not serving alcohol) can opt for composition scheme.

2. What is the tax rate applicable to a Composition Dealer?

Please use the chart below to understand the tax rate applicable:

The tax rate for manufacturers is proposed to be decreased from 2% to 1% as per the 23rd GST Council Meet held on 11th November 2017.

3. Is liability to pay taxes under Reverse Charge Mechanism covered under the Composition Scheme?

A Composition Dealer has to pay tax under Reverse Charge Mechanism wherever applicable.

The rate applicable to the supplies is the rate at which GST has to be paid. This means that rate under composition scheme should not be used for reverse charge purposes.

Also, no ITC is available for tax paid under reverse charge for a composition dealer.

4. I am purchasing goods from an unregistered dealer. Do I need to pay tax?

Feedback

Tax at normal rates has to be paid on purchases from an unregistered dealer only for the months of July and August 2017. From September there is no need to pay tax on these purchases.

No ITC is available on tax paid under reverse charge.






5. Should I pay IGST interstate purchases attracting reverse charge?

IGST should not be paid by a composition dealer. The dealer is required to pay tax under reverse charge, import of service or purchase from an unregistered dealer has to pay only CGST
and SGST.

6. How should the Tax amount be calculated?

A composition dealer is required to pay tax at a specific rate on total sales. Also, the dealer has to pay tax under reverse charge on specified purchases, purchase form unregistered dealer
and import of services.

This means that Total GST Payable =

Tax on supplies (net of advance and goods returned)

https://cleartax.in/s/composition-scheme-under-gst 1/4
12/29/2017 Composition Scheme - FAQ's
+ Tax on B2B transactions where Reverse Charge is applicable

+ Tax on B2B purchases from Unregistered suppliers (July and August 2017)

+ Tax on Import of Services

Have you filed your GSTR-4 yet?

File GSTR-4 Now!
File GSTR-4 under 15 minutes through ClearTax GST

The rate of Tax on transactions under Reverse Charge, purchase from an unregistered dealer and import of services will be at normal rates, i.e. the rates applicable to the supplies. Rates
under Composition Scheme are applicable only to sales of a composition dealer.

7. Should a Composition Dealer maintain detailed records?

No, a dealer registered under composition scheme is not required to maintain detailed records as required by a normal taxpayer.

8. Can Composition Dealers avail Input Tax Credit?

No, a Composition Dealer is not allowed to avail input tax credit of GST on purchases.

9. Can a Composition Dealer issue Tax Invoices?

A Composition Dealer has to issue Bill of Supply (https://cleartax.in/s/gst-bill-of-supply). They cannot issue a tax invoice. This is because the tax has to be paid by the dealer out of pocket.
A Composition Dealer is not allowed to recover the GST from the customers.

266
Share
10. What
This
are the returns to be filed by a Composition Dealer?

The taxable person is required to furnish only one return i.e. GSTR-4 on a quarterly basis and an annual return in FORM GSTR-9A.

Also,
228 auto drafted details are not available for a composition dealer for the quarters July – September, and October – December. This means that all sales details have to be manually

entered by the Composition Dealer.

34

11. Can a Composition Dealer collect tax from customers?

No, a Composition Dealer is not allowed to collect composition tax from the buyer.

12. Can a dealer involved in interstate supplies opt for Composition Scheme?

Composition Scheme is available only for dealers doing intra-state supplies. If a dealer is involved in inter-State supplies, then they have to opt out of the scheme.

13. What are the transition provisions if a business transits from Composition Scheme under old regime to Regular Taxation under GST?

Taxpayers registered under composition scheme under VAT will be allowed to take credit of input in stock, or in semi-finished goods or in finished goods held on the day before the day
of opting out of composition scheme.

14. What are the conditions for availing input credit on stock lying at the time of transition?

Following are the conditions which must be addressed by the taxpayer to avail credit on input at the time of transition from composition scheme to the normal scheme:

1. Inputs or goods will be used for making taxable supplies.

2. The CENVAT Credit was eligible to be claimed in the previous regime, however, couldn’t claim it being under composition scheme.
3. ITC is eligible for availing under GST regime.
4. The taxpayer has bills of input tax paid on such goods.
5. Invoices should not be older than 1 year from 1st July 2017 (i.e. not dated before 1st July 2016)

15. What is the treatment for input credit availed when transitioning from normal scheme to Composition Scheme?
Feedback

When switching from normal scheme to composition scheme, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day
immediately preceding the date of such switchover. The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.





16. Can I opt for Composition Scheme in one year and opt out in next year?

Yes, this is possible. You can opt to switch between the Composition Scheme and the normal scheme based on your turnover. However, you will have to keep in mind that this will affect the
way you issue invoices and file your returns.

The declaration of change can be submitted on the GST Portal.

17. I have many branches. Will composition scheme apply to each of them separately?

If Composition Scheme is opted for all businesses that are associated with this PAN

18. Is it true that Composition Dealers can sell a product at a lower price than regular dealers?

https://cleartax.in/s/composition-scheme-under-gst 2/4
12/29/2017 Composition Scheme - FAQ's
Yes. Composition dealers cannot charge GST on their sales. So the end consumer pays less money than usual.

19. Can I opt-in for composition scheme anytime during the year?

No. Before the beginning of every financial year, a registered taxpayer is required to provide a declaration on the GST Portal. This cannot be done anytime during the year.

20. What will happen if I opt out of composition scheme mid-year?

When a dealer opts out of composition scheme all the normal rules are applicable from the day of opting out.

For example, a composition dealer opts out of composition scheme on 15th October 2017. This means that the dealer will have to file two GSTR-4 for the quarters July – September, and
October (15 days). The dealer will also have to file GSTR-1, GSTR-2, and GSTR-3 for the period of October 2017 (sales from 15th October until end of the month)

*Latest update as per 23rd GST Council Meeting held on 10th Nov 2017
Threshold for composition scheme to be increased to 1.5 crore

Due date of GSTR-4 (https://cleartax.in/s/gstr4-composition-dealer-gst-return) for the quarter July-September, 2017 is extended to 24.12.2017

Share 228 Tweet

Are you a composition dealer?

File your GSTR-4 before 24th Dec 10 times faster on ClearTax GST

File GSTR-4 Now (https://cleartax.in/gst?ref=content-cta-right-cmp)

Are you a composition dealer?
File your GSTR-4 before 24th Dec 10 times faster on ClearTax GST

File GSTR-4 Now (https://cleartax.in/gst?ref=content-cta-right-cmp)

Popular Articles
GST Registration (https://cleartax.in/s/gst-registration)
ITC claim on Stock and Transition Forms (https://cleartax.in/s/itc-claim-stock-transition-forms)
GST Tran 1 and Tran 2 (https://cleartax.in/s/itc-claim-stock-transition-forms)
What is GST? GST Explained (https://cleartax.in/s/gst-law-goods-and-services-tax)
GST Registration ARN Status (https://cleartax.in/s/gst-registration-application-arn-status)

You Might Be Interested In

Types Of GST Returns And Their Due Dates (https://cleartax.in/s/returns-under-the-gst-law)
Track GST Payment Status (https://cleartax.in/s/track-gst-payment-status-failure)
Benefits of Registering Under GST Composition Scheme (https://cleartax.in/s/benefits-of-registering-under-gst-composition-scheme/)
Drawbacks of Registering Under the GST Composition Scheme (https://cleartax.in/s/drawbacks-of-registering-under-the-gst-composition-scheme/)
Know all about gst.gov.in (https://cleartax.in/s/all-about-gst-gov-in-gst-portal)

Recent Articles
CMP-04: How to Opt Out of Composition Scheme (/s/gst-cmp-04-filing/)
Guide to File CMP-02 on GST Portal (/s/gst-cmp-02-filing/)
How to file CMP-03 on GST Portal? (/s/gst-cmp-03-filing/)
CGST Rules: Chapter 2 – Composition Rules (/s/cgst-rules-chapter-2-composition-rules/)
Composition Scheme Rules under GST (/s/composition-scheme-rules-gst/)

ClearTax (https://cleartax.in)
Contact Us (https://cleartax.in/meta/contact)
About Us (https://cleartax.in/s/about-us)
Feedback

Careers (https://cleartax.in/s/careers)
Media & Press (https://cleartax.in/meta/press)
User Reviews (https://cleartax.in/meta/reviews)
TaxCloud India (https://taxcloudindia.com)




ClearTDS (https://cleartds.com)

Guides
Income Tax Slabs (https://cleartax.in/s/income-tax-slabs)
How to Link Aadhaar card to PAN (https://cleartax.in/s/how-to-link-aadhaar-to-pan)
View your Form 26AS (https://cleartax.in/s/view-form-26as-tax-credit-statement)
What is Form 16 (https://cleartax.in/s/what-is-form-16)
Salary Income (https://cleartax.in/s/salary-income)

File Income Tax Return (https://cleartax.in/income-tax-efiling)

Guide to Income Tax (https://cleartax.in/s/income-tax)
Guide to Efiling (https://cleartax.in/s/efiling-income-tax-return)
Secion 80 Deductions (https://cleartax.in/s/80c-80-deductions)

https://cleartax.in/s/composition-scheme-under-gst 3/4
12/29/2017 Composition Scheme - FAQ's
NRI (https://cleartax.in/s/income-tax-for-nri)
Capital Gains Income (https://cleartax.in/s/capital-gains-income)
House Property (https://cleartax.in/s/house-property)
Income Tax Verification (https://cleartax.in/s/income-tax-e-verification-evc)

Invest in Tax Saving Funds (https://cleartax.in/save)

Guide to Tax Savings (https://cleartax.in/s/income-tax-savings)
ELSS Guides (https://cleartax.in/s/elss)
Mutual Funds Guide (https://cleartax.in/s/mutual-funds)
Investments Guide (https://cleartax.in/s/investments)
SIP Guide (https://cleartax.in/s/sip)

Get GST Ready (https://cleartax.in/gst)

GST Software (https://cleartax.in/s/gst-software)
GST Training (https://cleartax.in/s/gst-training)
Input Tax Credit (https://cleartax.in/s/gst-input-tax-credit)
GST Returns (https://cleartax.in/s/gst-returns)
GST Invoice (https://cleartax.in/s/gst-invoice)
GST Services (https://cleartax.in/services/gst_services/c)
Download GST App (https://play.google.com/store/apps/details?id=in.cleartax.gst&hl=en)

ClearTax Business (https://cleartax.in/business)

(https://cleartax.in/business)
(https://cleartax.in/business)
(https://cleartax.in/business)Tax Filing for Professionals (https://cleartax.in/presumptive-tax-for-professionals)
Tax Filing for Traders (https://cleartax.in/tax-filing-for-traders)
Services for Businesses (https://cleartax.in/services/business/c)
Launch your Business (https://cleartax.in/services/startup_services/c)
Guide for Business & Professional (https://cleartax.in/s/freelance-professional-business-income)

Tax Tools (https://cleartax.in/tools)

Generate Rent Receipts (https://cleartax.in/save/rent)
Tax Calculator (https://cleartax.in/paytax/taxCalculator)
HRA Calculator (https://cleartax.in/paytax/hraCalculator)
Check refund status (https://cleartax.in/guide/checkincometaxrefundstatus)
Find HSN Code (https://cleartax.in/s/gst-hsn-lookup)
Upload your notice (https://cleartax.in/guide/income-tax-notices)
Download Cleartax App (https://play.google.com/store/apps/details?id=in.cleartax.cleartax&hl=en)

Find a CA (https://cleartax.in/ca/find-ca)
Sending ITR-V to CPC Bangalore (https://cleartax.in/s/guide-to-print-and-send-itr-v-to-cpc-bangalore)
What is Form 15G & Form 15H (https://cleartax.in/s/form-15g-and-15h-to-save-tds-on-interest-income)
File TDS Returns (https://cleartax.in/tds)
Guide for Business & Professional (https://cleartax.in/tds/guides)

(https://cleartax.in)

(https://play.google.com/store/apps/details?

id=in.cleartax.cleartax&referrer=utm_source%3Dwebsite%26utm_medium%3Dfooter-badge%26utm_campaign%3Dplaystore)

ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. ClearTax serves 1.5+ Million happy customers, 20000+ CAs &
Feedback

tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with ClearTax platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile
income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate 



Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with ClearTax GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns &
invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. ClearTax can
also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with ClearTax by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP.
Download ClearTax App to file returns from your mobile phone.

ClearTax is a product by Defmacro Software Pvt. Ltd.

Privacy Policy (https://cleartax.in/meta/privacy) Terms of Use (https://cleartax.in/meta/terms)
ISO 27001

Data Center

https://cleartax.in/s/composition-scheme-under-gst 4/4