Big organizations are finding new avenues and interpretations in the Goods and Service Tax (GST) regime to plan their tax liability to their benefit. GST is expected to ease the compliance burden for assessee; however, there are many Individuals, small scale enterprises and Startups which may find complying with the new tax laws a burden. Each tax law has its own compliance and so do we have in GST era. In total, there are at least 37 returns in a year for a person engaged in the manufacturing sector or tertiary sector provided he is not opting for Input Service Distributor (ISD) mechanism. For effective return filing, proper maintenance of data is required which demands competent resources.
Big organizations shall not face the problem in complying with such requirements because of their vast and competent resources, but complying with new provisions may be a difficult task for small scale businesses. So, as a remedy, Composition scheme has been introduced in GST. Those who opt for the scheme shall neither collect any tax on supplies made by them nor should avail input tax credit.

Eligibility for opting Composition Scheme
A registered person whose turnover in preceding financial year was less than seventy-five (75 Lakh)* can opt for composition scheme. This limit of fifty lakhs rupees can be increased, however, it cannot exceed one crore (1 crore) rupees.

Further, it is necessary that person opting for composition scheme:
• Is not engaged in supply of any service other than service of supplying food or any other article for human consumption or any
  drink (e.g. restaurants, fast food outlets etc.)
• Is not engaged in supplying any goods which are not taxable as per GST Act?
• Is not engaged in making any interstate supply of goods?
• Is not making any supply through electronic commerce operator which is not his agent.
• Is not engaged in manufacturing the prescribed goods.

In addition to this, certain conditions are also required to be complied as per composition rules. As per rules, a person opting to pay tax under composition scheme:
• Should not be a casual taxable person or a non-resident person
• Should not have stock which has been procured from any person (Agent, principal, branch situated outside the state) in the course of interstate trade or commerce or which have been imported.
• Should not have goods in stock which were purchased from the unregistered person. However, even if he has such stock he has a        remedy to pay tax under reverse charge on such goods.
• Shall pay tax under reverse charge mechanism if he procures and goods or services from unregistered persons.
• Shall mention at the top of the bill issued by him, the words "Composition taxable person, not eligible to collect tax on supplies"
• Shall mention on every notice and all signboards "Composition taxable person" whether it is being displayed at the principal place of business or any additional place of business.

How to avail Composition scheme
If the assessee is registered under existing law and migration has been done.
If an assessee has migrated and registration on provisional basis has been granted, then he can opt for composition scheme by filing an intimation in FORM GST CMP-01 on Common Portal. Such intimation shall be filed before the appointed date, however, if one fails to do so he has another chance to file an intimation within thirty days (30 days) from the appointed date.


If a person is applying for fresh registration under GST Act.
If a person is applying for registration under GST, then at that time, he may opt to pay tax under composition scheme in Part B of FORM GST REG-01. Registration shall be taken by such person within thirty days (30 days) from the date on which he becomes liable to registration.


If the assessee is registered under Goods and Service Tax Act.
Any person who is registered under GST Act can opt for composition scheme by electronically filing an intimation in FORM GST CMP-02 on Common Portal. Such person will be required to file intimation before the commencement of each financial year for which he is willing to opt for composition scheme.

Composition Scheme in case of multiple registrations
If there are more than one registration on the same PAN (Permanent Account Number), then composition scheme cannot be opted only for any one of the registrations. i.e. all the registered persons having the same PAN would have to opt for composition scheme. For example: If a person A is having two registrations on same PAN in two different states, then he cannot opt to pay tax under composition scheme only for one registration. If he wants to pay tax under composition scheme, then he should do so for both the registrations.
Further, as per rules if any intimation is furnished for opting composition scheme in respect of any registered unit then it shall be deemed that such intimation has been furnished in respect of all the registrations on same PAN.

 
Rate of tax of composition levy
Under the composition scheme following rates shall be applicable:

Category of registered persons Rate of Tax     
In case of manufacture 1%
Supplies made in clause (b) of paragraph 6 of Schedule II (services in relation to supply of food or any other article for human consumption or drink) 2.5%
Other suppliers eligible for composition levy but not included in above 2 categories 0.5%

 

Withdrawal from composition scheme
Option to pay tax under this scheme shall remain valid until all the conditions mentioned in the act and prescribed in the rules are being satisfied. If assessee ceases to fulfill any such condition, then he shall be liable to pay tax as per other provisions of the act and shall issue tax invoice. In this case, intimation shall be furnished within seven days of the occurrence of such event. Option availed by registered person to pay tax under composition scheme can also be withdrawn voluntarily by such person and in such case, intimation shall be given before the date of such withdrawal. Intimation in both the cases shall be furnished in FORM GST CMP-04. Also, the proper officer can issue show cause notice in FORM GST CMP-05 and deny the option to pay tax under composition scheme if there are reasons for an officer to believe that the said registered person was not eligible to pay tax under this scheme.
If the composition scheme is withdrawn for any one registration either voluntarily or because of proper office denying the option to pay tax under the said scheme, then it shall be deemed that applicability of scheme on other registrations on same PAN has also been withdrawn or denied in the same manner.

 

* Initially the limit was Rs 50 Lakh. The GST Council, in its meeting held on 11th June 2017, has recommended increase in the aforesaid turnover limit for Composition Levy for CGST and SGST purposes from Rs.50 lakh to Rs.75 lakh in respect of all eligible registered persons, referred to in the aforesaid subsection