Composition Scheme Rules under GST

Posted on 22 April 2023 Category : GST terms

Effective date for composition levy under GST

This post explains about Composition Scheme Rules under GST

Composition Scheme Rules under GST provide for all the procedural compliance w.r.t. intimation for Composition Scheme, effective date for levy, conditions and restrictions on levy, validity of levy and rate of tax.

Intimation and Effective date for Composition Levy

For persons already registered under pre-GST regime

Any person being granted registration on a provisional basis (registered under VAT Act, Service Tax, Central Excise laws etc) and who opts for Composition Levy shall file an intimation in FORM GST CMP-01, duly signed, before or within 30 days of appointed date. If intimation is filed after the appointed day, the registered person:

Will not collect taxes
Issue bill of supply for supplies

FORM GST CMP- 03 must also be filed within 60 days of exercise of option:

Details of stock
Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of option

For persons who applied for fresh register under GST to opt scheme

For fresh registration under the scheme, intimation in FORM GST REG- 01 must be filed.

Registered under GST and person switches to Composition Scheme

Every registered person under GST and opts to pay taxes under Composition Scheme, must follow the following:

Intimation in FORM GST CMP- 02 for exercise option
Statement in FORM GST ITC- 3 for details of ITC relating to inputs lying in stock, inputs contained in semi-finished or finished goods within 60 days of commencement of the relevant financial year

Effective date for composition levy

The option to pay tax under Composition Scheme shall be effective:

For persons already registered under pre-GST regime: Appointed Day
Registered under GST and person switches to Composition Scheme: Filing of Intimation

For persons who applied for fresh register under GST to opt scheme Option to pay tax under Composition Scheme shall be effective from:

Where the application for registration has been submitted within thirty days from the day he becomes liable for registration, such date.
In the above case, the effective date of registration shall be the date of grant of registration.

Conditions and Restrictions for Composition Levy

The person opting for the scheme must neither be a casual taxable person nor a non-resident taxable person.
The goods held by him in stock on the appointed date must not be purchased from a place outside his state. The goods should therefore not be classified as:

Inter- state purchase
Imported Goods
Branch situated outside the State
Agents or Principal situated outside the State

Where the taxpayers deals with unregistered person, tax must be paid or no stock must be held
Mandatory display on invoices of the words ” composition taxable person, not eligible to collect tax on supplies”
Mandatory display of the words “Composition Taxable Person” on every notice and signboard displayed at a prominent place 7. He is not a manufacturer of such goods as may be notified by the Government during the preceding financial year

Validity of Composition Levy

It depends on fulfilment of conditions (discussed above), however an eligible person for scheme may also opt out of the scheme by filing an application. In case Proper Officer has reasons to believe that taxpayer is not eligible for scheme or contravened any Rules or ACT, he may issue show cause notice followed by an order denying the entailment of scheme.

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CGST Act Section 9 Levy and collection of GST

CGST Act section 10 composition Levy under GST

CGST Act section 11 power to grant exemption from tax

CGST Act section 12 Time of supply of goods

CGST Act section 13 Time of supply of services

CGST Act Section 14 Change in rate of tax in respect of supply of goods or services

CGST Act Section 15 value of taxable supply under GST

CGST Act section 16 eligibility and conditions for taking input tax credit

CGST Act Section 17 Apportionment of credit and blocked credits

CGST Act section 18 availability of credit in special circumstances