✓Minimal Documentation ✓Flexible Repayment ✓Collateral Free Loan | Apply for Business Loan Now!

Introduction

Ever since it was first announced that Goods and Services Tax, or GST, would become the new norm of business transactions, it has greatly streamlined the taxation process. However, there is another avenue of the GST system, known as the GST Composition Scheme, which makes this taxation process even more convenient and efficient for taxpayers.

Here’s what you need to know about the GST Composition Scheme, who can opt for it as well as the rates it provides to GST-registered taxpayers around the country:

What is the GST Composition Scheme?

Simply put, the GST Composition Scheme is a simple and efficient mechanism for tax payment. Compared to the regular norms of GST filing, opting for the Composition Scheme in GST makes it easier for taxpayers to avoid several GST-related formalities and additional paperwork.

For instance, while regular GST norms require taxpayers to submit a few monthly returns as well as an annual return, under the GST Composition Scheme, taxpayers need only submit one quarterly and one annual return. This greatly simplifies the GST payment process.

Moreover, since the Composition Scheme under GST offers fixed conditions and guidelines for tax payment, it also makes it much easier for taxpayers to comply and pay taxes as per their turnover. In many cases, it helps reduce the overall tax liability of the taxpayer. This is because under the Composition Scheme GST , you are expected to pay a fixed rate between 1% and 6% of your total turnover as GST.

Who Can and Cannot Opt for GST Composition Scheme?

Before the year 2019, any taxpayer with an annual turnover of less than Rs. 1 Crore could opt for the GST Composition Scheme. However, in 2019, the Central Board of Indirect Taxes and Customs announced that this threshold limit would be raised from Rs. 1 Crore to Rs. 1.5 Crores. This means that if the annual turnover of a taxpayer is below Rs. 1.5 Crores, they can easily opt for the Composition Scheme under GST.

However, there is one major exception to this limit and it applies to taxpayers in various North-Eastern states as well as the state of Himachal Pradesh. For taxpayers in this region, the threshold limit is Rs. 75 Lakhs.

A variety of service providers, shopkeepers, traders, small manufacturers, machine operators, repair shop owners, and many more can opt for the GST Composition Scheme.
However, there are exclusions as well, including:

  • People or businesses that supply goods through an e-commerce operator

  • Non-resident or casual taxable entities

  • Manufacturer of pan masala and tobacco

  • Ice cream manufacturers

  • Entities that have purchased goods from unregistered suppliers

What are the Rates Under the GST Composition Scheme?

As mentioned before, with the GST Composition Scheme, taxpaying entities are expected to pay a fixed rate of GST on their turnover. This rate of GST applied to their overall turnover depends on the type of business conducted by the taxpaying entity. To get a better understanding of the applicable GST Composition Scheme rates, here is a helpful chart:

Note that the overall GST rate is split into two parts: CGST and SGST.

Type of Business

CGST

SGST

Total GST

Manufacturers and traders of goods

0.5%

0.5%

1%

Restaurants (not serving alcohol)

2.5%

2.5%

5%

Other service providers

3%

3%

6%

If you are a taxpaying individual or business owner who wants to reap the benefits of the GST Composition Scheme, you can do so by opting in for the scheme at the official GST website. To get started, you will need to fill out the form CMP-02 in order to demonstrate your readiness to opt for the composition scheme. This form is essentially an online application form that needs to be filed by any taxpayer who is registered as a taxpayer under GST.

Conclusion

With the Composition Scheme in GST, tax paying has become much easier and more efficient for businesses across the country. That is not to mention that apart from its easier compliance, it also plays a huge part in reducing the tax liability for many of these businesses with its fixed GST Composition Scheme rates. However, there is still a lot of information about GST and its various benefits that might be helpful for entrepreneurs to know about.

To that end, you can read more about GST on the Finserv MARKETS platform that features a wide variety of GST-related information relating to its history, benefits, applicable tax laws, new compliances and the latest GST-focused news. You can also go through the various business loans offered on the Finserv MARKETS platform, each of which comes with benefits such as minimal documentation, attractive interest rates, and flexible repayment tenure options.

Happy Customers of Finserv MARKETS

Getting a loan to take care of my wedding and relieving my parents to enjoy the occasion was the best decision I ever made. Easy-to-apply, amazing interest rate and quick disbursal, what more can one ask for!

I am passionate about the vehicle I drive. I want to protect it with the best available option. What amazed me was the full transparency, quick quotes and the attractive discount on the premium while choosing the annual payment option!

Check your personal loan eligibility in seconds!

My husband and I will finally move into our own house this Diwali. All thanks to Bajaj Finserv, with competitive interest rates, minimal processing fees and easy to repay EMIs, our dream saw the light of reality in no time!

Get the best FD interest rates starting @ 8.40%. Let's start!

Kids grow up fast and to fulfill their dream trip to Disneyland I had everything but instant funds. With no collateral or guarantor required and a hassle-free processing, I gifted my family a memorable trip to Orlando with just a click!

Get sum insured up to 1 Crore! Let's start!

The best way to start looking for health insurance is to do a close study of the coverage needs and checking the insurance company's claim ratio. No unnecessary jargons, easy to apply claims process and choice of premia!

Zero additional charge on part-payment option on Business loans! Let's start!

I bought my first iPhone using my Bajaj Finserv EMI Network Card. Zero downpayment with a No cost EMI on Bajaj Finserv EMI store just made my day!

Get home loan sanctioned online in 72 hours! Let's start!