GST Composition Scheme Rules - Benefits, and Criteria

Individuals who have applied for fresh register under GST to select the scheme will have to file an intimation in Form GST REG 01.

Individuals who have registered under GST and have later switched to the Composition Scheme will be required to file an intimation in Form GST CMP 02 to exercise the option. These individuals will also have to submit a statement in Form GST ITC 3 for details of ITC pertaining to inputs contained in finished or semi-finished commodities, and inputs lying in stock, within 60 days from the date on which the relevant financial year began

Restrictions and Conditions for Composition Levy

The individual who opts for the Composition Scheme will have to ensure that he/she is not an NRI taxable individual or a casual taxable individual. He/she must also ensure that the goods in his/her possession in stock on the appointed date should not be bought from a location outside his/her state. He/she must also ensure that the commodities are not considered as imported goods, or inter-state purchases, or purchased from a branch located outside the state, or from principal or agents located outside the state.

Effective Date for Composition Levy

Individuals who have already registered under the pre-GST regime will be required to pay tax under the Composition Scheme on the appointed day. Those who have registered under GST and then switched to Composition Scheme will also have to file an intimation. Those who have applied for fresh register under GST will be required to pay tax under the Composition Scheme from where the registration application has been furnished within 30 days from the date on which said individual becomes liable for registration.

Tax Rate

Different categories of registered individuals will be charged with different tax rates. For instance, manufactures are charged 1% CGST, 1% SGST and 2% overall; suppliers are charged 2.5% CGST, 2.5% SGST, and 5% overall; and other supplies are taxed at 0.5% CGST, 0.5% SGST, and 1% overall.

Validity of Composition Levy

The validity of composition levy will depend upon whether or not the aforementioned conditions are fulfilled. However, individuals who are eligible for the scheme can choose to opt out of it by simply filing an application.

Composition Scheme Rules under GST - Compliance

Composition Scheme Rules under GST cover the submission of various forms that are meant for certain reasons. Here is a table with a list of forms and the reasons for which they can be used: