What is Composition Scheme Under GST?

No one is a stranger to the fact that Goods and Services Tax has a slew of compliance standards and formalities. However, small businesses such as grocery stores, barber shops, small snack bars, etc. shouldn’t have to put up with the burden, which is why the government launched the composition scheme. It has fewer compliance hassles in comparison to standard GST system.

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Who can Avail the Composition Scheme?

The qualification criteria for the composition scheme is based on the annual turnover of a business.

A business owner whose annual turnover is less than Rs. 75 lakhs falls under the composition scheme. However, for Uttrakhand, Himachal Pradesh, and the north-eastern states, such as Sikkim, Assam, Nagaland, Mizoram, etc. the turnover threshold is Rs. 50 lakhs instead.

Rate of Taxes Under the Composition Scheme

The following rates of taxes are applicable under the GST composition scheme:

• 1% (CGST+SGST) for the majority of goods and services
• 5% (CGST+ SGST) for food and restaurant services other than liquor
• 2% (CGST+SGST) for manufacturers, other than the exempt goods as notified by the government

The following are some of the key points about the composition scheme:

• Businesses registered under the composition scheme can’t avail input tax credits.
• While the businesses registered under the regular GST scheme have to file 3 types of returns on a monthly basis, those under the GST scheme have to file only one return and that too every 4 months.
• Businesses under the composition scheme don’t have to issue tax invoices. They have to issue bills of supply instead.