ADOPTION OF COMPOSITION LEVY

The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.

How do I sign up for the Composition Scheme?
When a business owner wishes to apply for composition scheme, they should file the application with the tax department at the beginning of the financial year (1st April). The sign-up process is PAN-based, so business owners are advised to keep their PAN cards ready. The registration process is divided into 3 categories:

For businesses registered under pre-GST regime:
a. If the business is already registered under the previous tax regime, the business owner will be provided with a provisional certificate during their GST registration.
b. They should file FORM GST CMP-01 through the GSTN portal on or before 30 days from July 1, 2017. If the filing is delayed, the business owner will not be allowed to collect tax or issue bills of supply.
c. Once this is done, the business owner should furnish details regarding the stock held by them before they opted for composition scheme in FORM GST CMP-03 within 60 days. Details regarding purchases made from unregistered vendors should also be included in this form. After filing FORM GST CMP-03, the business owner should not collect any tax from the appointed day but, they can issue bill of supply for supplies made after that day.

For businesses that are registering for the first time
In this case, the business owner should file FORM GST REG-01. In Part B of the form, under Section 10, select “Registration as composite business owner” option .

For businesses registered under GST
When a business transitions from the normal tax scheme to the composition scheme, it must pay an amount equal to its available input tax credit. The input tax credit will be calculated based on the amount of input materials, semi-finished and finished goods held in stock.
To register for composition scheme, the business owner should file FORM GST CMP-02, and furnish details of ITC related to inputs, semi-finished/finished goods (within 60 days from the beginning of the financial year) held in stock, in FORM GST ITC-3.

How do I sign up for the Composition Scheme?

SL.NO.

Category of registered person

Rate of Tax

1

Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobaccoproducts etc.)

2% ( 1% Central tax plus 1% State tax) of the turnover

2

Restaurant Services

5% ( 2.5% Central tax plus 2.5% SGST) of the turnover

3

Traders or any other supplier eligible for composition levy

1% ( 0.5% Central tax plus 0.5% State tax) of the turnover

We at our organization would assist your organization in adopting the composition scheme for payment of tax.