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February 11, 2021

Functionality to opt in for composition has been made available for FY 2021-22 on GSTN

by CA Shivam Jaiswal in GST

Functionality to opt in for composition has been made available for FY 2021-22 on GSTN

The Goods and Services Tax Network (GSTN) says the functionality to opt in for composition has been made available for FY 2021-22 in the Dashboard of taxpayers at Common Portal. The eligible taxpayers, who wish to avail the composition scheme may opt in for composition up to March 31, 2021.

Composition Scheme is a simple and easy scheme under GST where small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1.5 crore. The provisions of the composition scheme are covered under Section 10 of the CGST Act.

The following are the advantages of opting for composition scheme:

  • Limited tax liability
  • Lesser compliance
  • Higher liquidity as supplies is taxed at a lower rate

How can a taxpayer opt for composition scheme?

To opt for the Composition Scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal. This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme. 

What is the rate of tax of Composition Levy?

Rule 7 of the CGST Rules, 2017, prescribes the rate of tax under composition levy.

The category of registered persons, eligible for composition levy under section 10 shall pay tax at the rate specified in the below mentioned table:

Sr NoCategoryRate of tax
1In case of manufacturer0.5% of the turnover in the State or Union territory
2In case of food and restaurant services2.5% of the turnover in the State or Union territory
3In case of any other suppliers (traders, agents)0.5% of the turnover of taxable supplies of goods and services in the State or Union territory

Can a person supplying services pay tax under composition levy?

Section 10(2A) was inserted by the Finance (No. 2) Act, 2019. According to Section 10(2A), a registered person, not eligible to opt to pay tax under sub-section (1) and sub-section (2), whose aggregate turnover in the preceding financial year did not exceed Rs 50 lakhs, may opt to pay, in lieu of the tax payable by him under section 9(1), an amount of tax calculated at such rate as may be prescribed, if he is not:

  • engaged in making any supply of goods or services which are not leviable to GST
  • engaged in making any inter-State outward supplies of goods or services;
  • engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52
  • manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council
  • casual taxable person or a non-resident taxable person

Therefore, Section 10(2A) permits service providers to be included under Composition levy.

Amendments by CBIC vide Notification No. 50/2020-Central Tax Dated 24th June, 2020.

CBIC amended Rules 7 of the CGST Rules 2017 with a new entry for Composition tax payers who are providing services to be taxed at rate of 6% (CGST – 3% & SGST/UTGST – 3%) vide Notification No. 50/2020-Central Tax Dated 24th June, 2020.

In Rule 7 of Central Goods and Services Tax Rules, 2017, the following entry has been added – Registered persons not eligible under the composition levy under sub-sections (1) and (2), but eligible to opt to pay tax under section 10(2A) to be taxed at 3% of the turnover of taxable supplies of goods and services in the State or Union territory.

What do you mean by aggregate turnover?

“Aggregate Turnover” means the aggregate value of all:

  • taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis)
  • exempt supplies
  • exports of goods or services or both
  • inter-State supplies of persons having the same Permanent Account Number

Aggregate Turnover is to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Let us refer to the table below to understand clearly what are the rates applicable under Composition Levy:

Category of registered personsRate Applicable  
Manufacturers, other than manufacturers of such goods as may be notified by the Government0.5% of the turnover in the State or Union territory  
Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II  2.5% of the turnover in the State or Union territory  
Any other supplier eligible for composition levy under subsections (1) and (2) of section 100.5% of the turnover of taxable supplies of goods and services in the State or Union territory  
Register persons not eligible under the composition levy under sub section (1) and (2), but eligible to opt to pay tax under section 10(2A) (Supplier of Services)3% of the turnover of taxable supplies of goods and services in the State or Union territory

What GST Return is a Composition Taxpayer required to be filed?

GSTR-4 is a GST Return that has to be filed by a composition dealer. Unlike a normal taxpayer who needs to furnish 3 monthly returns, a dealer opting for the composition scheme is required to furnish only 1 return which is GSTR 4 once in a year.

What is the due date of filing GSTR 4?

GSTR 4 has to be filed on an annual basis. The due date for filing GSTR 4 is 30th of April following the relevant financial year. For example, the GSTR-4 for FY 2021-22 is due by 30th April 2022.

Eligible taxpayers who wish to avail the composition scheme and benefit from the same for FY 2021-22 should do so before 31st March, 2021.

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