How to Opt for the GST Composition Scheme
To opt for the GST Composition Scheme for the financial year, follow these steps:
1 Access the GST Portal
Visit the official GST Portal at https://www.gst.gov.in/
2 Login to Your Account
Enter your credentials to access your GST account.
3 Navigate to the Composition Scheme Section
Go to Services → Registration → Application to Opt for Composition Levy
4 Fill Out Form GST CMP-02
Complete the form with accurate details and submit it electronically.
5 Choose Your Submission Method
- With DSC (Digital Signature Certificate): Select the certificate and sign
- With EVC (Electronic Verification Code): Enter the OTP sent to your registered email and mobile number
6 Receive Acknowledgment
Upon successful submission, an acknowledgment will be sent to your registered email and mobile number.
How Should a Bill Be Issued by a Composition Dealer Under GST?
If you're a composition dealer under GST, billing works a little differently for you — and it's super important to get it right!
First things first:
You cannot issue a tax invoice.
Why? Because under the GST Composition Scheme, you're not allowed to charge GST to your customers. Instead, you pay a fixed tax directly to the government from your own funds.
✅ So, what's the right way to bill?
Issue a Bill of Supply rather than a tax invoice. This is the correct format for composition dealers and ensures you stay compliant with GST rules.
Don't forget this important line!
At the very top of your bill, make sure to include this clear disclaimer:
"Composition taxable person not eligible to collect tax on supplies"
💡 Why does this matter?
This small but important detail helps build trust with your customers and keeps your billing process smooth and legal. Staying compliant doesn't have to be complicated — just a few simple steps, and you're good to go!
Why Choose the Composition Scheme?
- ✅ Lower tax rates (as low as 1%)
- ✅ No need to maintain detailed records
- ✅ Quarterly return filing instead of monthly
- ✅ More time to focus on running and growing your business
Whether you're a manufacturer, trader, or a restaurant owner (not serving alcohol), the Composition Scheme could save you both time and money.
GST Rates for Composition Scheme Dealers - At a Glance
If you're registered under the GST Composition Scheme, you're probably enjoying the simplicity it offers—but it's important to know the correct tax rates based on your type of business. Here's a quick and easy breakdown:
| Type of Business | CGST | SGST | Total GST Rate |
|---|---|---|---|
| Manufacturers & Traders (Goods) | 0.5% | 0.5% | 1.0% |
| Restaurants (Not Serving Alcohol) | 2.5% | 2.5% | 5.0% |
| Other Service Providers | 3.0% | 3.0% | 6.0% |
So if you're a dealer using the Composition Scheme, make sure you're applying the right rate based on your business type. It helps keep your GST filings organized, within regulations, and worry-free!
How Does a Composition Dealer Make GST Payments?
If you're a composition dealer, here's something you should keep in mind: GST isn't collected from your customers—it's paid directly out of your own pocket. That means you're responsible for making the tax payment yourself, based on your total turnover.
Your GST payment will include three main components:
- Tax on outward supplies (goods or services you sell)
- Tax under reverse charge, if it applies to your business
- Tax on purchases from unregistered dealers — But don't worry! This only applies to certain notified goods or services, and as of now (from 1st Feb 2019), it hasn't been notified. So currently, this part isn't applicable.
So, while the Composition Scheme keeps things simple, you still need to stay aware of how and when your tax payments are due. Staying updated helps you avoid any surprises!
What GST Returns Does a Composition Dealer Need to File?
Good news for composition dealers — your GST return process is much simpler than regular taxpayers!
Here's what you need to do:
1. Quarterly Statement - CMP-08
You'll need to file CMP-08 every quarter, which is basically a simple summary of your sales and tax paid. The due date is the 18th of the month following the end of each quarter.
2. Annual Return - GSTR-4
You need to file GSTR-4 annually. The deadline is 30th April of the following financial year (starting from FY 2019-20).
Are There Any Disadvantages of the GST Composition Scheme?
While the Composition Scheme is great for small businesses looking to simplify GST compliance, it does come with a few limitations you should be aware of:
1. No Inter-State Sales
You can only do business within your own state. Inter-state supply of goods is not allowed under this scheme.
2. No Input Tax Credit
You won't be able to claim Input Tax Credit (ITC) on your purchases. This means you can't reduce your tax liability using the tax you paid on inputs.
3. Restrictions on Certain Supplies
If you're involved in selling non-taxable goods under GST (like alcohol) or intend to use e-commerce platforms, the Composition Scheme does not apply to you. These activities aren't allowed under this scheme.
So, while the Composition Scheme keeps things simple, it's important to weigh these restrictions before registering.
Let's Stay Connected!
Have questions or need help with GST registration and compliance? We're just a message away!
Email: works.dbassociates@gmail.com / connectus@dnbca.com
Website: connectus@dnbca.com
Disclaimer:
The information provided in this blog is for general awareness and educational purposes only. It should not be considered professional advice. Readers are advised to consult a qualified Chartered Accountant or tax professional for guidance specific to their situation. While every effort is made to ensure accuracy, the author and the firm assume no responsibility for any errors or omissions.