Oct 12, 2017
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GST composition scheme rules

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GST Composition scheme rules

GST Composition scheme rules  is a convenient way for small taxpayers to escape from too many legal compliances and pay the tax at a fixed rate on the turnover.  The GST Council in its 22nd meeting has decided to allow taxpayers with Rs 1.5 crore to file quarterly returns and at the same time increased the threshold for GST composition scheme rules to Rs. 1 crore** from the present Rs. 75 lakh.

**GST: Composition scheme extended to Rs. 1 cr, quarterly returns for taxpayers with turnover of Rs 1.5 cr 

What are the total numbers of rules available for GST composition scheme rules?

 1- Intimation for composition levy

 2-Effective date for composition levy

 3-Conditions and restrictions for composition levy

 4-Validity of composition levy

 5-Rate of tax of the composition levy

What are the intimation for composition levy under GST composition scheme rules, 2017?

Rule 1 deals with the intimation for composition levy:

1 For persons already registered under pre-GST regime

  • Any person being granted registration on a provisional basis (registered under VAT Act, Service Tax, Central Excise laws etc.) and who opts for Composition Levy shall file intimation in FORM GST CMP-01, duly signed, before or within 30 days of appointed date. If intimation is filed after the appointed day, the registered person:

a) Will not collect taxes

b)  Issue bill of supply for supplies

  • FORM GST CMP- 03must also be filed within 60 days of exercise of option:

a) Details of stock

b) Inward supply of goods received from unregistered persons held by him on the date proceeding the day of exercise of option.

2. Also For persons who applied for fresh register under GST India to opt scheme

  • For fresh registration under the scheme, intimation in FORM GST REG- 01 must be filed.

3.Registered under GST and person switches to Composition Scheme

  • Every registered person under GST and opts to pay taxes under Composition Scheme, must follow the following:
  1. a) Intimation in FORM GST CMP- 02for exercise option
  2. b) Statement in FORM GST ITC- 3 for details of ITC relating to inputs lying in stock, inputs contained in semi-finished or finished goods within 60 days of commencement of the relevant financial year

What are the Effective date for composition levy under GST composition scheme rules, 2017?

  • Rule 2 deals with the Effective date for composition levy:

1.Effective date to pay tax under composition levy would be:

  • For persons already registered under pre-GST regime: Appointed Day
  • Registered under GST and person switches to Composition Scheme: Filing of Intimation

2.Also,for persons who applied for fresh register under GST to opt scheme Option to pay tax under Composition Scheme shall be effective from:

  • Here the application for registration has submitted within thirty days from the day he becomes liable for registration, such date.
  • In the above case, the effective date of registration shall be the date of grant of registration.

What are the conditions and restrictions under GST composition scheme rules, 2017?

  • Rule 3 deals with Condition and restrictions for availing option of payment of tax:

  1. Not applicable to causal / non-resident taxable person.
  2. Thus,the goods held in stock by him on the appointed day have not been purchased from:
  • Inter- state purchase
  • Imported Goods
  • Branch situated outside the State
  • Agents or Principal situated outside the State
  1. However, Where the tax payers deals with the unregistered dealer
  2. And also where the tax payers deals with the unregistered dealer
  3.  Not engaged in the manufacture of goods as notified, during the preceding financial year.
  4. Thus Mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued.
  5. Thus Mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place & at every additional place or places of business.
  6. While the registered person paying tax may not file a fresh intimation every year and he may continue to pay tax under the said provision.

What is the validity of composition levy under cGST composition scheme rules, 2017?

  • Rule 4 deals with the validity of composition levy:

  1. The options exercised by a registered person remain valid so long as he satisfies all the conditions
  2. If conditions not satisfy, then will pay tax as normal payer and issue tax invoice for same within 7 days file form GST CMP-04 as intimation.
  3. If it is withdrawn by the registered person, then before the date of withdrawal file an application in FORM GST CMP-04.
  4. Where the proper officer has reasons to believe that the registered person was not eligible to pay tax and is not eligible and contravene act or rules then:
  • While notice issued to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt
  • However,within 15 days the tax payer must file a reply in FORM GST CMP-06
  • Thus,Proper officer shall issue an order in FORM GST CMP-07 within thirty days of receipt of such reply.
  1. As per conditions mention above in case of application made, or furnishing details, or receiving order shall furnish the same in a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock.
  2. However, Any intimation for withdrawal or denial of the option in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same PAN.


What are the rates that have been applicable under GST composition scheme rules, 2017?

  • Rule 5 deals with the rate of the tax of the composition levy:


Serial No Category Of Registered Persons Rate of tax
1 Manufacturers(other than manufacturers of such goods as may be notified by the Government) 1%
2 Suppliers(Food or any other article for human consumption  & drinks other than alcoholic drinks for human consumption) 2.5%
3 Other supplies 0.5%


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Renuka is a Final Year LL.B. student at Siddharth College of Law. She has done her Bachelors in Banking & Insurance and has also completed her Masters in Business Management . She likes to participate in legal workshops and Moot Courts. Besides her interest in law, she has a keen aptitude for legal research and is good at putting her analysis into words.

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