A person whose aggregate turnover does not exceed Rs. 50 Lakhs (special category States except Uttarakhand) and Rs. 75 Lakhs (rest of India) has the option to register as a composition tax payer. This option can be exercised in 3 scenarios:
- During transition from the previous tax regime to GST
- While taking a new registration
- On shifting from regular to composition scheme
Let us understand the process to be followed by a tax payer to opt for the composition scheme in each of these scenarios:
Transition from previous tax regime to GST regime
During transition to the GST regime, all tax payers registered in the previous tax regime have been migrated as regular dealers. A dealer who wants to opt for the composition scheme under GST can follow the process given below:
- File an intimation in Form GST CMP-01 in GST portal. The last date to furnish Form GST CMP-01 is 30th September, 2017.
- Furnish Form GST CMP-03 showing details of stock, including goods received from unregistered persons, held on the day before the date from which he opts to become a composition tax payer. Form GST CMP-3 should be furnished within 90 days after filing Form GST CMP-01.
New registration as composition tax payer
Under GST, when a person’s aggregate turnover crosses Rs 10 Lakhs (Special Category States) and Rs. 20 Lakhs (Rest of India), the person has to register under GST. In such a case, while filing the application for registration in Form REG-1, the person can opt to become a composition tax payer in Part B of Form REG-1.
Shifting from regular to composition scheme
Persons who are registered as regular dealers can opt for the composition scheme if their turnover does not cross Rs. 50 Lakhs or Rs. 75 Lakhs, as applicable. Persons who want to shift from regular to composition scheme should intimate the same before the beginning of the financial year in which they want to become a composition tax payer. This facility will only be given before the beginning of every financial year and if not opted, then the person has to wait for the next financial year.
The process to be followed to shift from the regular to composition scheme is:
- File an intimation in Form GST CMP-02 in the GST portal
- Furnish Form GST ITC-03 within 60 days from the commencement of the financial year.
Note: Persons who have registered as regular dealers after 1st July, 2017 have the provision to shift to composition scheme till 30th September, 2017. Persons who would like to opt for the composition scheme for the year 2017 should ensure that they do so by 30th September, 2017.
Hence, the composition scheme is a good option for tax payers who mostly supply to end consumers. They only have to pay a percentage of their turnover as tax liability and compliance activities are also limited. Persons registered as regular dealers who want to opt for the composition scheme in the year 2017, should ensure that they opt for the same by 30th September, 2017.
The rate of tax applicable to composition tax payers is given below:
|Type of person||Rate of tax on turnover|
|Manufacturers, other than manufacturers of notified goods (Pan masala, ice cream, tobacco products)||2% (1% CGST + 1% SGST)|
|Restaurant services||5% (2.5% CGST + 2.5% SGST)|
|Traders||1% (0.5% CGST + 0.5% SGST)|
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