Eligibility Criteria for Composition Scheme under GST Explained

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  • Last Updated on 28 June, 2021

What is a criteria of turnover for eligibility?

Person whose aggregate turnover in the preceding financial year did not cross Rs.75 lakhs. In the case of 9 Special states, the limit of turnover is Rs.50 lakhs.

Can person under composition scheme supply outside the state?

Person under composition scheme cannot supply the goods outside the state. But he can have inward supply from outside the state. Eligibility is decided based on two factors, first is person should be qualified and should not be disqualified.  Here it is important to note that not just the CGST Act rather Rule also gives the eligibility criteria. Let us have a combined reading of the same. Composition scheme shall be adopted uniformly by all registered person having same PAN.

Condition and Restrictions for Composition Levy:

Rules: Rule 3(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions: a) He is neither a casual taxable person nor a non-resident taxable person; b) The goods held in stock by him on the appointed day have not been purchased in the course of inter-state trade or commerce or imported from a place outside India or received from his branch situated outside the state or from his agent or principal outside the state, where the option is exercised under sub-rule (1) of rule1; c) The goods held in stock by him have not been purchased from an unregistered person and where purchased, he pays the tax under sub-section(4) of section 9; (RCM) d) He shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both received from unregistered persons; e) He was not engaged in the manufacturer of goods as notified under clause (e) of sub-section (2) of section 10, during the preceding financial year; f) He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and   g) He shall mention the words “composition taxable person” on every notice or signboard displayed at the prominent place at his principal place of business and at every additional place or places of business.

FAQs on Composition Scheme in GST that could help you:

1. What are the other conditions and restrictions subject to which a person is allowed to avail of composition scheme?

 

The person exercising the option to pay tax under section 10 shall comply with the following other conditions inter alia, namely:

a) He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and

b) He shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.

2. Whether a Restaurant is supplying liquor / alcohol is eligible for Composition scheme?

A Restaurant is supplying  liquor / alcohol is not eligible for Composition scheme because according to the provisions of the Act, composition scheme cannot be availed on those goods and services on which GST is not levied and liquor / alcohol are out of the scope of GST. Person has no choice to go to Composition scheme, rather he has an only window of regular scheme which is mandatory if he falls under the criteria of aggregate turnover.

3. In case a person has registration in multiple states? Can he opt for payment of tax under composition levy only in one state and not in the other state?

The option to pay tax under composition scheme will have to be exercised for all states. If aggregate turnover for all the registration crossed the benchmark limit of aggregate turnover of Rs.75 lakhs / 50 lakhs, then he cannot opt the composition scheme for any registration under his PAN.

4. Can supplier of Services opt for composition levy?

No, the supplier of services cannot opt for composition levy. Only exception is supplier of restaurant services.

5. Who are not eligible to opt for composition scheme?

  • Supplier of services other than supplier of restaurant service;
  • Supplier of goods which are not taxable under the CGST Act/ SGST Act/ UTGST Act.
  • An inter-State supplier of goods.
  • Manufacturer of certain notified goods.

6. If a person registered under composition scheme crosses the limit of aggregate turnover, what will happen?

The option to pay tax under composition scheme lapses from the day on which his aggregate turnover during the financial year exceeds the specified limit (Rs.75 lakhs/ Rs.50 lakhs). He is required to file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days from the day on which the threshold limit has been crossed.

However, such person shall be allowed to avail the input tax credit in respect of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him and on capital goods held by him on the date of withdrawal and furnish a statement within 30 days of withdrawal containing the details of such stock held in FORM GST ITC-01 on the common portal.

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