GST Composition Dealer

1. Who is a Composite Dealer in GST?

  • The very word ‘composition’ comes from the Latin componere, meaning “put together”
  • It is a feature to provide comfort to assessee by discounting them from requirement of paying tax on value addition by maintaining detail of ‘inputs’ and ‘outputs’, and
  • To go for a put together scheme by paying taxes on at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate

2. Features that a Composition Scheme Provides to a Composition Dealer in GST

  • Simplicity
  • Reduced compliance cost for small businesses opting for composition scheme
  • the scheme is an optional one (i.e., at the option of assessee but after complying the provisions prevalent under the scheme)
  • Option to pay taxes at a prescribed percentage of turnover for every quarter, instead of paying tax at normal rate

3. Limitations for Composite Dealer in GST

Limitation No.1Threshold limit : The CGST Act which governs the provisions of composition scheme lays out the option for only those registered persons whose aggregate turnover is within the threshold limit The threshold limit for other than special category states is Rs. 1.5 Crores and those for special category states it is to be stated as Rs. 75 Lacs (except for the state of Uttarakhand and Jammu and Kashmir)
Limitation No.2The composite dealer in GST is not permitted to collect tax from the recipient of supplies
Limitation No.3The Composition dealer under GST cannot also avail the credit of input tax paid by him on his inward supplies

4. GST Rate for a Composite Dealer

The CGST ACT Provides for upper limit for composition rate for different categories of registered person.

Manufacturer1% (both CGST and SGST) of the turnover in State or turnover in Union territory.
Restaurants not serving alcoholService provided by Restaurants : by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption of any drink (other than alcoholic liquor for human consumption) at the rate of five percent (2.5% of CGST and 2.5% for SGST)
Other suppliers1% of the turnover taxable supplies of goods in State or turnover in Union territory Note: It is to note that the aggregate turnover shall not be leviable to composition rate and only turnover of taxable supplies shall be leviable to composition levy.

5. Eligibility Criteria: Composition Dealerunder GST

  • He is not engaged in the supply of service other than restaurant services stated above
  • Is not engaged in making any supply of goods which are not leviable to tax under GST Laws
  • Is not engaged in making any inter-state outward supplies of goods
  • He should not be engaged in making any supply of goods through an electronic commerce operator
  • He should not be a manufacturer of such goods as may be notified by the Government on the recommendations of the Council (Ice cream and other edible ice products/Pan Masala/Tobacco and Substitutes)

6. GST Return for Composition Dealer

A composite dealers GST Return comprises mainly of two returns and they are:

 ReturnTypeDue Date
FORM GSTR-4Quarterly Return18th of the month following the end of the quarter instead of any statement of outward or inward supplies
FORM GSTR-9AAnnual ReturnStill this return is not made available on the GST Network/Portal

7. GST Invoice Format for Composition Scheme

The composite dealer in GST shall not issue a tax invoice and shall only issue a BILL OF SUPPLY containing various details as given below:

a)Name, address and GSTIN of the supplier
b)a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters
c)date of its issue
d)name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient
e)Harmonised System of Nomenclature Code for goods or services
f)description of goods or services or both
g)value of supply of goods or services or both after considering discount or abatement, if any; and
h)signature or digital signature of the supplier or his authorised representative