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 No	Category	Rate of tax
1	In case of manufacturer	0.5% of the turnover in the State or Union territory
2	In case of food and restaurant services	2.5% of the turnover in the State or Union territory
3	In 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 persons	Rate Applicable
Manufacturers, other than manufacturers of such goods as may be notified by the Government	0.5% 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 10	0.5% 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 31^st March, 2021.

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Know all about Form GSTR-4 Annual Return, now available on GST Portal

What is the GSTR 4?

GSTR-4 is an annual return that has to be filed by a composition dealer. Under the GST composition scheme, taxpayers will be required to file one annual return, unlike a normal taxpayer who needs to furnish 3 monthly returns.

What do you mean by Composition Scheme?

Composition Scheme is a simple scheme under GST for taxpayers. 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. Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover. The advantages of registering under composition scheme are lesser compliance (returns, maintaining books of record, issuance of invoices), limited tax liability and high liquidity as taxes are at a lower rate.

Who is required to file GSTR 4?

A taxpayer opting for the Composition Scheme is required to file GSTR-4 except for:-

Non-resident Taxable Person
Taxpayers liable to collect TCS
Input Service Distributors
Taxpayers liable to deduct TDS
Compounding taxable person
Suppliers of OIDAR (Online Information and Database Access or Retrieval)

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What is the due date of filing GSTR 4?

GSTR-4 being an annual return should be filed by 30^th April for every financial year by the composition dealers. For instance, the GSTR-4 for FY 2019-20 is due by 30th April 2020. However vide Notification No. 59/2020 – Central Tax dated 13^th July, 2020, CBIC has extended the due date of GSTR 4 till 31^st August, 2020.

Can the GSTR 4 be revised?

GSTR-4 cannot be revised after filing on the GSTN Portal.

Is there any penalty applicable for late filing GSTR 4?

A late fee of Rs. 200 per day is levied if the GSTR-4 is not filed within the due date. However, the maximum late fee cannot exceed Rs. 5,000.

What is the format of GSTR4?

Part 1 to Part 3 comprises of General Information like GSTIN, Name of the Taxable Person and Aggregate turnover details
Part 4 comprises of Inward supplies including supplies on which tax is to be paid on reverse charge. It includes:-
Inward Supplies from Registered Supplier (Attracting Reverse Charge)
Inward Supplies from Registered Supplier (Other than Reverse Charge)
Inward Supplies from Unregistered Persons
Import of Services (subject to Reverse Charge)
Part 5 includes Amendments to details of inward supplies furnished in returns for earlier tax periods in Part 4 [including debit notes/credit notes and their subsequent amendments]
Part 6 includes tax rate wise details of outward supplies (net of advance and goods returned). Here, you will provide the details of a tax rate, total turnover, out of turnover reported and the composition tax amount including both central tax & State/UT tax.
Part 7 includes amendments in Outwards Supply details furnished in returns for earlier tax periods in Part 6
Part 8 includes Consolidated Statement of Advances paid/Advance adjusted on account of receipt of supply.
Part 9 pertains to TDS Credit received
Part 10 includes details of Tax payable and paid. Details of Integrated Tax, Central Tax, State/UT Tax, and cess tax amount payable as well tax amount paid are to be provided here.
Part 11 pertains to Interest, Late Fee payable and paid. This section for those taxpayers who have not paid the taxes timely.
Part 12 includes Refund claimed from Electronic cash ledger. The amount which is available for the refund will auto-filled under this section
Part 13 includes Debit entries in cash ledger for tax/ interest payment (to be populated after payment of tax and submission of return).

How is one supposed to file GSTR 4?

Step 1 – Downloading the GSTR4 Offline Tool

You can download the GSTR4 Offline Tool from the Portal without login to the GST Portal.

Access the https://www.gst.gov.in/ URL
Select Downloads > Offline tools > GSTR4 Offline Tool
Select Download. The GSTR4 Offline Tool is downloaded in Downloads folder
Unzip the downloaded files and extract the files from the downloaded zip folder GSTR_4_Offline_Utility_v3.0.zip.
Double click the GSTR4_Excel_Utility_v3.0.xls and Click the Enable Editing button in the excel sheet.

Step 2 – Enter details in the GSTR-4 worksheet

Launch GSTR4 Excel based Offline Tool and navigate to worksheets
In the GSTIN field, enter the GSTIN and In the Financial Year and Tax Period field, enter the Financial Year from the drop down list
Details which is to be added in each tab is given below:
4 – A&B(B2B) – Inward Supplies received from a registered supplier (attracting reverse charge)
5A (B2BA) – Amendment of inward Supplies received from a registered supplier
4C(B2BUR)- Inward Supplies received from an unregistered supplier
4C(B2BURA) – Amendment of Inward Supplies received from an unregistered supplier
4D(IMPS) – Import of Services
5B(CDNR) – Debit Notes/Credit Notes (for registered)
5B(CDNUR) – Debit Notes/Credit Notes (for unregistered)
6(TXOS) – Tax on outward supplies made (Net of advance and goods returned)
8A(AT) Advance amount paid for reverse charge supplies in the tax period.

Step 3 – Validate the details entered using ‘Validate Sheet’ button

Once all details are entered in the worksheet, click the Validate Sheet button to validate the GSTR4 worksheet.
In case of successful validation a message ‘Sheet successfully validated will appear. No error(s) found’ is displayed and it means that the sheet is validated and one can proceed to generate the JSON (.json) file. Click the OK button.
In case of unsuccessful validation, a pop-up is displayed with error message. Click the OK button.
In case of validation failure; check for cells that have failed validation and correct errors as per help text
Once all the errors are rectified, click the Validate Sheet button on each sheet
A pop-up message ‘Sheet successfully validated. No error(s) found’ is displayed once the sheet is validated. Click the OK button.

Step 4 – Generated the JSON

Upon successful validation, Click the Go Home button to navigate to the home page.
On the home page click the Generate JSON File to upload button to generate JSON file for upload on the GST Portal
You may have to wait depending on the volume of data entered for each sections. Once done, Click the OK button
A confirmation message ‘The data in the sheets are successfully captured in the JSON file’. Please save this file and upload in the online portal to initiate filing’ is displayed that JSON file has been generated on your desktop. Click the OK button and save this file.

Step 5 – Upload the generated JSON on GST Portal

Access the https://gst.gov.in/ URL. The GST Home page is displayed.
Click the Services > Returns > Returns Dashboard command.
The File Returns page is displayed. In the Financial Year drop-down list, select the financial year for which the return has to be uploaded.
In the Return Filing Period drop-down list, select the return filing period for which the return has to be uploaded. Click the Search button
In the GSTR4 tile, click the Prepare Offline button
Click the Choose file button to choose the JSON file prepared using the Offline Tool.
The uploaded JSON file would be validated and processed
Upon successful validation and processing, the details entered would be populated in respective Tables
In case of validation failure of one or more details upon processing of uploaded JSON file on the GST portal, status will be updated as ‘Processed with Error’. Click the Generate error report link to download the report
Once the report is generated, click the Download error report link to download the error report.
Unzip the file from .zip folder. Browse the location to save the extracted error report and click the Extract button. The Unzipped folder contain JSON file
Now Open GSTR4 Tool and go to Home Tab. Under the section Error File Handling, click the Open Downloaded Error JSON File button
A file dialog box will open. Navigate to extracted error folder. Select the file and click the OK button.
Success message will be displayed. Click the OKbutton to proceed.
Navigate to error file in computer, open the json file, it mentions the record which error during upload considering all worksheets. Correct the errors as mentioned in the “GST Portal Validation Errors” in each sheet
After making the corrections, click Validate Sheet button to validate the sheets. Pop-up appears once sheet is validated successfully
Click on ‘Generate JSON File to upload’ to generate JSON(.json) file for upload of GSTR4 Return details prepared offline on GST Portal.

Step 6 – Open Downloaded Return File for GSTR4

To Open the Downloaded Return file for GSTR4, click “Open Downloaded GSTR4 JSON File” on Home tab. Browse the JSON(.json) file and click the OK button
Select the downloaded JSON (.json) file and click on OK to proceed. Once successfully imported, you will get the message “Downloaded GSTR4 file successfully opened
Modify the invoice details as per requirement. Use the Action as ADD in column J to add more records.
After making the modifications, click the Validate Sheet button to validate the sheets.
Pop-up saying “Sheet successfully validated. No error(s) found” appears once sheet is validated successfully.
After each section is successfully validated, click the Get Summary button to update the summary on Home tab.
Click on ‘Generate JSON File to upload’ to generate JSON(.json) file for upload of GSTR4 return details prepared offline on GST portal.

Step 7 – Filing of GSTR 4

Access the https://gst.gov.in/ URL. The GST Home page is displayed.
Click the Services > Returns > Returns Dashboard command.
In the Financial Year drop-down list, select the financial year for which the return has to be uploaded. In the Return Filing Period drop-down list, select the return filing period for which the return has to be uploaded.
Click the SEARCH button and the Click the Prepare Online button.
Answer the questions that will enable the relevant section to appear on the next screen. Once all the questions are answered with YES/NO, click on NEXT button at below part of screen.
Click on Proceed to File button
Verify the amount due in the section Present Quarter Liability.
Click on FILE GSTR-4 button, if the Funds are less a pop up” Insufficient Balance “will appear on the screen, prompting taxpayer to make payment via CREATE CHALLAN
The taxpayer can make the payment by clicking on CREATE CHALLAN button. He has option to pay via E-payment,over the counter or NEFT/RTGS
Once the payment is completed, the Cash Ledger Balance section gets updated. The taxpayer is navigated back to GSTR4 Tax Payable page
Click on PREVIEW GSTR-4 button. A pdf file will show summary that can be saved for future references by taxpayer.
Once you are satisfied with the Returns Filled, Select the declaration Checkbox along with Authorized Signatory and then click the File GSTR-4 button
Amount due will offset the amount due and taxpayer is navigated to verification page.
Complete the GSTR-4 Filling by providing the OTP in case of EVC or by using DSC