• Small taxable persons having turnover upto Rs.

40 lakhs
are exempt from GST. And 20 lakhs for North Eastern
and hilly areas
• GST requires heavy compliance cost due to detailed
accounting and paper work involved.
• Small taxable persons do not have sufficient
knowledge and expertise to comply with the
requirements relating to records and accounts.
• Hence, for them, a simplified composition scheme has
been provided by Section 10 of CGST
• Composition Scheme is a simple and easy scheme
under GST for taxpayers. Small taxpayers can get rid of
tedious GST formalities and pay GST at a fixed rate of
turnover.
Who can claim for Composition Scheme?
• This scheme can be opted by any taxpayer whose
turnover is less than Rs. 1.5 crore.
• In case of North-Eastern states, the limit is Rs 75
lakhs.
This scheme was available only for the manufacturers
and traders of goods and also to the restaurants not
serving alcohol.
• Further, tax department has given service providers
with turnover of up to Rs 50 lakh to opt for the
composition scheme.
• The scheme is optional. The option lapses on the day
his aggregate turnover exceeds the limit.
Who cannot opt for Composition Scheme?
The following people cannot opt for the scheme:
• Restaurants that serve alcohol
• Manufacturer of ice cream, pan masala, or tobacco.
• Manufacturers of any goods as may be notified by
the recommendation of GST Council.
• A person making inter-state supplies
• A casual taxable person or a non-resident taxable
person
• Businesses which supply goods through an e-
commerce operator
• Taxpayer supplying exempt supplies.
What are the conditions for availing Composition Scheme?
The following conditions must be satisfied in order to opt for
composition scheme:
• No Input Tax Credit can be claimed by a dealer opting for
composition scheme
• If a taxable person has different segments of businesses (such as
textile, electronic accessories, groceries, etc.) under the same
PAN, they must register all such businesses under the scheme
collectively or opt out of the scheme.(PAN INDIA basis)
• The taxpayer has to mention the words ‘composition taxable
person’ on every notice or signboard displayed prominently at
their place of business.
• A composition dealer cannot issue a tax invoice. This is because a
composition dealer cannot charge tax from their customers. They
need to pay tax out of their own pocket. Hence, the dealer has to
issue a Bill of Supply.
• The dealer should also mention “composition taxable person, not
eligible to collect tax on supplies” at the top of the Bill of Supply.
• As per the CGST (Amendment) Act, 2018, a manufacturer or
trader can also supply services to an extent of ten percent of
turnover, or Rs.5 lakhs, whichever is higher. This amendment will
be applicable from the 1st of Feb, 2019. Earlier the limit was up to
Rs 5 lakhs.
• The taxpayer has to pay tax at normal rates for transactions under
the Reverse Charge Mechanism.
• The dealer cannot supply GST exempted goods
• The registered person shall become the regular person from the
date on which such conditions are violated.
• Turnover of all businesses registered with the same PAN should
be taken into consideration to calculate turnover.
• a Composition Dealer is not allowed to collect composition tax
from the buyer.
GST rates for a composition dealer
• The taxable person opting for the Composition Scheme will
have to pay a fixed percentage of turnover as tax.
• MANUFACTURERS AND traders(goods) pays 1% 0.5% of
CGST and 0.5% of SGST comprising total 1%
• Restaurants not serving alcohol pays 5% .
2.5% of CGST and 2.5% of SGST comprising total 5%
• Other service providers pays 6%
3% of CGST and 3% of SGST comprising total 6%.
A dealer registered under composition scheme is not
required to maintain detailed records. But has to file
quarterly returns and annual returns.
Advantages of registering under composition scheme:
• Lesser compliance (returns, maintaining books of record,
issuance of invoices)
• Limited tax liability
• High liquidity as taxes are at a lower rate.
Disadvantages of registering under GST composition scheme:
• A limited territory of business.
• The dealer is barred from carrying out inter-state outward
supplies or transactions. i.e., he can purchase inter-state
but cannot sell inter-state.
• No Input Tax Credit available to composition dealers.
• The taxpayer will not be eligible to supply exempt goods or 
goods through an e-commerce portal.
• He cannot claim for any other exemptions
Shifting from Composition to Regular or vice a versa.
• Intimation every year to be duly signed and submitted
if the person is opting for the Composition Scheme.
• The option has to be exercised every year by filing e-
declaration before Financial year. It is not automatic.
• The option of changing from regular scheme to
composition scheme can be exercised on financial
year basis only.
• The option for changing composition scheme to
Regular scheme can be done at any point of time
during the financial year.
• If the scheme is misused, the option can be
withdrawn by the ‘proper officer’.