Are you an Entrepreneur? Learn all About Composition Scheme


After the GST law, starting a new business is not that difficult as it used to before in the previous taxation regime. It is because you need to run to the income tax office, banks and Government offices for showing them different proofs. However, now after the GST implementation, the process of filing taxes has become so easy and simple that people can easily plan to start a business of their interest. Under the GST, there are several schemes that are designed for the entrepreneurs or small businesses following certain terms and conditions. Every taxation system has certain rules and regulations that a company, businesses or an organization needs to follow to ensure compliance with statuary provisions.  There are several steps like filing timely returns, periodic payment of taxes, and maintaining prescribed records that every taxpayers needs to undertake. However, when it comes to small businesses or entrepreneurs they find it overwhelming due to lack of sufficient knowledge required to understand the law and provisions. Therefore, to make the law simple and easier for such people and businesses, Government has introduced a composition scheme under the GST. By getting registered under this scheme fulfilling the requirements, the will ensure greater compliance without maintaining records. It will be easier for the people to find GST rates through effective GST rate finder and generating invoices using GST software.

In this post, we discuss all the necessary details of the composition scheme. Take a look.

Key Features

  • Eligibility: There are certain rules and regulations to get registered under the composition scheme. If you fulfil them than you can register yourself for the same. Taxpayers whose annual turnover is less than or equal to 75 lakhs are eligible to get registered or else they have to register themselves under the normal GST provision.
  • No Input Tax Credit: According to the section 16, the supply of those goods and services on which the tax of composition scheme has been paid are not eligible to avail the benefit of Input Tax Credit.
  • Quarterly Returns: The taxpayers registered under the composition scheme have to file the returns once in evert quarter instead of filing three or four times under the normal GST law.
  • Eligible for Intra-state Supplies: Only those taxpayers who deal with the supply of goods and services within the State are eligible for getting registered under this scheme.
  • Tax Rate: The tax rate under this scheme I’ll be lesser than the normal GST taxation applied to normal taxpayer, but, it won’t be less than 1% of the turnover of financial year. The tax rates under this schemes may vary within 1% to 3%.
  • Bill of supply: Taxpayers who are registered under the GST need not to generate invoices like normal GST taxpayers. All they need to do is generate a bill of supply and present it to the tax authorities within the prescribed date.
  • Requires Voluntary Application: Every year the taxpayers need to get registered under the composition scheme voluntarily. If in case, the annual turnover exceeds 75 lakhs than the taxpayers will be transferred to the regular GST scheme. People who are already registered in VAT composition scheme also needs register themselves in it voluntarily.
  • Penalty: If the person has registered himself in the composition scheme and afterwards the person is found to be ineligible for the scheme, the tax authorities can impose penalty. The penalty could be the amount of tax along with his tax liability. Therefore, it’s advisable to carefully read the terms and conditions of the scheme before getting registered into it.

When to Register under Composition Scheme?

Any taxpayer who fulfils the eligibility process can get register in the composition scheme. The person needs to register voluntarily and the application needs to be filed on or before 31st March of the financial year. It is because accordingly the returns can be filed. Dealers registered under the composition scheme can switch to the regular GST in case their turnover exceeds 75 lakhs. However, once they switch to the normal GST law, they cannot register themselves again into the composition scheme in that financial year.

The Way Forward

Filing returns, generating the bill of supply, finding GST rates using GST rate finder is easier under this scheme and that’s the reason more people are getting registered into it. Filing returns is easier as the person has to file them once in every quarter. Therefore, if you fulfil the criteria take the advantage of this scheme.


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