Video Transcription

Today let us talk about the GST Composition Scheme
The composition scheme allows registered taxpayers under GST whose turnover in the preceding financial year was less than Rs 75 lakh to pay a percentage of their yearly turnover in a state as tax. This relieves the taxpayers from collecting tax from their customers directly and provides other benefits as well:

  • It replaces multiple monthly returns with a single quarterly return
  • It allows turnover pertaining to outward supplies to be reported in a single line item on the return
  • It lets taxpayers pay a lower rate of tax, thus providing them a competitive advantage
  • It offers relaxed rules around maintaining books of accounts and records under GST

There are certain conditions that you must meet in order to register under GST composition scheme 

  • You must be a registered taxpayer
  • Goods that you hold in stock, must not have been purchased from outside the state or from outside India
  • You cannot purchase goods from an unregistered dealer else you will have to pay tax on them.
  • The aggregate of your turnover in the preceding financial year must have been less than Rs. 75 lakhs.
  • If more than one registered persons have the same PAN, then a registered person shall not be eligible for the composition scheme unless all registered persons under the same PAN opt in for the composition scheme

Those not eligible for the composition scheme include: 

  • Service providers except restaurant
  • Suppliers of non-taxable goods
  • Taxpayers engaged in the interstate supply of goods
  • Those engaged in supply of goods through an eCommerce operator
  • Manufacturers of notified goods
  • Casual taxable persons or non-resident persons

If it turns out that an ineligible taxpayer enters into the composition scheme, he will later be liable to pay the differential tax along with a penalty.

You don’t need to file forms every year to pay composition levy. However, you do need to notify the government if you become ineligible for the composition scheme. You can do so by filing Form GST CMP-04 within seven days of becoming ineligible.

We hope you found this useful. For more information on such topics visit

  • Share: