Composition scheme in GST

KEY TAKEAWAYS OF GST COMPOSITION SCHEME

What’s the GST COMPOSITION SCHEME?

The GST Composition Scheme is designed for small taxpayers to reduce the burden of tax enforcement. Small taxpayers do not need to file monthly GST returns, and they need to pay marginal GST at a fixed turnover rate.

Any company with an annual turnover of up to 1.5 Crore can opt for GST registration under the composition scheme.

Who cannot opt for the scheme of composition?

·       Manufacturer of ice cream, pan masala, or tobacco

·       Businesses that supply goods through an e-commerce operator

·       Relief of taxpayers providing exempt supplies

·       Supplier of services other than service providers for restaurants

·       Casual taxable person or non-resident taxable person

GST composition scheme registrations:

The Composition System is a simple and easy scheme for taxpayers under the GST. Small taxpayers can get rid of tiring GST required documents and pay GST at a fixed turnover rate.

Any taxpayer whose revenue is less than Rs. 1.5 crore* can opt for this scheme.*Central Board of Indirect Taxes and Customs notified the increase to the limit from Rs 1.0 Crore to Rs. 1.5 Crores.

Voluntary Registrations:

In order to benefit from the benefits of this program, taxpayers must register on a voluntary basis. If as the case may be the taxpayer’s yearly income turnover reaches 75 lakh, it will be moved to the normal scheme. Taxpayers who are already part of the composition of GST must register on a voluntary basis under this scheme.

The GST Rate applicable for Gst Composition Scheme

The tax rate or recommended for different categories of Gst  Composition Scheme registered persons has been defined below:

 

	Composition Scheme	Regular Scheme
Filling of GST Return	Composition taxpayers needed to file quarterly return.	Ordinary taxpayers needed to file the monthly return.
Issue of Tax Invoice	Composition taxpayers can not issue tax invoices to their clients.	Normal taxpayers can issue a tax invoice to their clients.
Applicable Tax Rate	Composition taxpayers need to pay nominal GST at a fixed rate of turnover, which is normally 1-5%.	The tax rate for regular taxpayers’ goods and services, which is from 0-28%.
Input Credit	Composition taxpayers cannot avail of ITC benefits.	Normal taxpayers can avail of ITC benefits.
Regular Compliance	Relaxed Compliance in order to safeguard small businessmen.	Normal compliance required.

The validity of the levy on composition

 

It focuses on the fulfillment of the conditions discussed above but the person qualified for the scheme can also opt-out of the scheme by filing an application. In the event that the Proper Officer has grounds to suspect that the taxpayer is not eligible for the scheme or has contravened any of the Rules or Actions, the Proper Officer may issue a notice of cause followed by an order rejecting the scheme.

 

GST Compliance Regulations of the Composition Scheme

 

Composition Scheme Rules under the GST specify for the submission of various forms intended for the respective purposes, followed by a deadline for the submission of the following forms:

1. What exactly is Form GSTR 4 Annual Return:-Annual GSTR 4 Annual Return for each Financial Year will be submitted by all Composition Taxpayers (w.e.f 01 April 2019).
2. For those taxpayers who have opted for GST Composition Scheme in the new indirect tax regime, the GSTR-4 form is an annual return.
3. Under the GST composition scheme, taxpayers will be required to file one return for each fiscal year only. The taxpayers will also be required to file CMP-08 for the payment in each qtr of the year. The expected date for each CMP-08 filing is the 18th of every succeeding quarter

4. Who is supposed to file Form GSTR-4 Annual Return:

All Composition Dealers who have preferred composition scheme for some time, must file GSTR 4 on a yearly basis from 01.04.2019 on.

1. Both registration composite taxpayers are required to file a tax return. A taxpayer who opts for a Composition Scheme is required to file GSTR-4, except for –Non-resident taxable citizen
   Taxpayers who are eligible to collect TCS
   Distributors of Input Operation
   Taxpayers liable to deduct TDS
   Composing taxable citizen
   OIDAR Suppliers (Online Information and Database Access or Retrieval)
2. May Nil GSTR 4 Annual report filed: you can register the report of Zero for the financial year if you have:

• NOT made any outward supply
• NOT received any goods/services
• Have NO other liability to report
• Have filed all Form CMP-08 as Nil

5. Due date of filing GSTR 4 & GST CMP-08 Payment Form: It must be filed by 31/10/2020 for FY 2019-20 and the due date for GST CMP 08 Due Date for FY 2020-21

Quarterly Period	Timeline Dates
1st Quarter – April to June 2020	18th July 2020
2nd Quarter – July to September 2020	18th October 2020
3rd Quarter – October to December 2020	18th January 2021
4th Quarter – January to March 2021	18th April 2021

• Required to file Form GSTR-4 Annual return: Click on Services-Return-Annual Return-Select FY 2019-20-Search-GSTR 4- File Return to login into your dashboard.

• Process step to be taken care of during the filling of GSTR 4:

• The File key is only activated if:
• No additional cash is required for liabilities
• You tapped on the checkbox for the declaration
• You picked the approved signatory information from the drop-down list
• The surplus balance paid by GST CMP-08, which is included in the derogatory declaration of responsibility, will also be added to liabilities if any.
• If the available balance in the electronic cash ledger is less than the amount needed to cover the liabilities, you can directly generate the voucher by clicking on the Build CHALLAN button.
• Taxes and late payments are drawn up automatically in Table-8, but interest is the feedback of the customer. Liabilities can only be discharged by an automated cash ledger.
• The inward supply data (from Table 4B, 4C, and 4D for each tax rate) will be auto-drawn in Table-6 only after the Taxpayer has pressed the ‘Continue to register’ button. The balance before that is shown as ‘0’ (zero)
• After entering outward supply information in Table-6 and pressing the “Proceed to register” button, RCM-based liability is auto-populated from the details provided in Table 4B, 4C, and 4D. Table-6 indicates then the gross tax obligation
• The taxpayer has to enter the descriptions of the outward supplies in Table-6 (Row 12-16) of GSTR-4 manually.
• Overview of self-assessed liability is auto-populated on the basis of filed Form CMP-08 in Table-5 of the GSTR-4 Annual Return & is uneditable.
• The GST amount in Table-4 of GSTR-4 is basically auto calculation made on the input of the values fed in Taxable Value and tax rate fields. However, the GST amount is editable in the table. The CESS shall be paid by the taxpayer.
• The cumulative revenue is expected to be entered over the last year and if there is no sale or revenue in the last year of the company or if it is not registered, it could be zero.
• The annual GSTR 4 return submission will be triggered after the taxpayer has completed the filing of all quarters of the CMP-08 for that fiscal year.

Note: Point to be considered while using offline Tool

8. A few Important points to consider before filing GSTR 4:

• Form GSTR 4 can be filed only if, all applicable quarterly statements in Form CMP 08 of that financial year, have been filed.
• Form GSTR-4 Annual Return, once filed, can’t be revised
• After successfully filing, ARN will be generated and intimated through email and SMS
• Currently, only online filing has been enabled on the portal. Shortly, an offline tool to file Form GSTR-4 Annual Return will also be made available.

9. New updates in Form GSTR 4 –

Current features of GSTR 4 Return Form

• The GSTR 4 annual return due date has been extended again until 31 October 2020 for the year 2019-20 Read more
• Let us understand how to create use offline techniques to plan Form GSTR 4 Annual Composition Taxpayer Return. The GST platform has created an offline excel tool for all tax-paying citizens to help them obtain their GSTR 4 annual return form
• GSTR 4 Returns shall be filed on an annual basis for compounding taxable individuals. The last date of filing of the GSTR-4 (CMP-08) payment form is the 18th of the month following the section. GSTR 4 (CMP-08) returns may be filed on 18 April, 18 July, 18 October, and 18 January, and so on.
• GSTR – 4 The form is submitted by all taxpayers enrolled under the composition scheme.
• Business enterprises listed under the composition system would be expected to pay tax at fixed rates on a regular basis without the use of an input tax credit facility.
• The taxpayer would be allowed to show the overall amount of products purchased over a given time and the tax collected at the composition rate

10. Annual Return Form GST-4 Available on the GST Server.

Currently, the GSTN has agreed to encourage residents, assessors, and companies to file GSTR 4 on an annual basis. This has been achieved because of the community’s demand.

The form is also available on the site, which further eased the assessment and the taxpayers in identifying and submitting the form as per their approval.

More read Key points of 42nd GST council Meeting headed By FM N. Sitharaman

11. Recent Council GST Meeting with regard to for Composition Traders

• GSTR 4 return is required to be submitted on a quarterly basis instead of on a quarterly basis with the tax paid on a quarterly basis.
• The GST Council expanded the annual turnover cap to 1.50 Crores, effective from 1 April 2019.
• GST threshold of 6% relevant to the Composition Scheme for service providers and sales of up to 50 lakh per year
• Note: The aforementioned changes shall be taken following the official notification of the govt.

12. Does the GSTR 4 be revised?

After filing on the GSTN Site, GSTR-4 can not be updated.

13. Is there a penalty for the late filing of GSTR 4?

A delayed fee of Rs. 200 per day shall be charged if the GSTR-4 is not filed within the due date. The cumulative late fee can not, nevertheless, exceed Rs. 5,000.

14. The basic term normally used in GSTR 4

• SAC – Services Accounting Code
• B2C – From registered person to unregistered person
• UQC – Unit Quantity Code
• POS – Place of Supply of Goods and Services
• GSTIN – Goods and Services Taxpayer Identification Number
• UIN – Unique Identification Number
• HSN – Harmonised System of Nomenclature
• B2B – From one registered person to another registered person

Going to conclude

Any person who opts for the Gst Composition Scheme shall be deemed to have opted for all places of business having the same registered PAN. Therefore you cannot want any of the places of business to be registered under the scheme.

GSTR-3A Notices issued to cancelled Composition Taxpayers for non-filing of GSTR-4 (

GSTN Advisory – Dated 20th July 2025 )

GST Issue: Some taxpayers whose GST registration under the Composition Scheme was cancelled have reported receiving notices in Form GSTR-3A for non-filing of GSTR-4, even though they are no longer active.

GST Dept Clarification:GSTN has clarified that Form GSTR-4 is required to be filed for the financial year in which cancellation took place, irrespective of the date of cancellation. For example, if a taxpayer’s registration was cancelled on 30th September 2024, they are still required to file GSTR-4 for FY 2024–25. Failure to do so will trigger the issuance of notice in GSTR-3A.

Taxpayers who have received GSTR-3A notices should

Verify if GSTR-4 for the relevant FY has been filed. If not filed, they must immediately file GSTR-4 to avoid late fees and further legal action. If already filed and notice received in error, taxpayers may contact GST Helpdesk or raise a grievance through the GST Portal. The rules of the Gst Composition Scheme under the GST were supposed to be strict and strict for the individuals using the Composition Scheme.

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