The Composition Levy is an alternative method of levy of tax designed for small taxpayers whose turnover is below 1.5 crore. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.
The option to pay tax under composition levy would remain valid so long as conditions mentioned in section 10 of the CGST Act, 2017 and Rule 3 to 5 of the CGST Rules, 2017 remain satisfied.
You can opt out from the composition in certain situations, which we will discuss in the article further.
PERSONS NOT ELIGIBLE FOR COMPOSITION SCHEME
Following persons are not allowed to opt for the composition scheme:
a) a casual taxable person or a non-resident taxable person;
b) suppliers whose aggregate turnover in the preceding financial year crossed Rs. 1.5 Crore and 75 lakhs in some states;
c) supplier who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis; d) supplier of services, other than restaurant service;
e) persons supplying goods which are not taxable under GST law;
f) persons making any inter-State outward supplies of goods;
g) suppliers making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and
h) a manufacturer of following goods:
| S. No. | Classification (Tariff item/ Chapter) | Descriptions |
| 1 | 2105 00 00 | Ice cream and other edible ice, whether or not containing cocoa |
| 2 | 2106 90 20 | Pan masala |
| 3 | 24 | Tobacco and manufactured tobacco substitutes |
Note: There is no restriction on procuring goods from inter-state suppliers by persons opting for the composition scheme
WITHDRAWAL FROM COMPOSITION LEVY
The application to withdraw from the Composition levy must be filed within 7 days from the date when the taxpayer fails to satisfy any condition of Section 10 of the CGST/SGST Act or rules made thereunder. Alternatively, taxpayers may voluntarily opt out of the Composition levy by filing an application.
The following are the situations where you can opt out from the composition levy:
The registered person who intends to withdraw from the composition scheme can file a duly signed or verified application in FORM GST CMP-04.
Any intimation or application for withdrawal in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.
STOCK INTIMATION AFTER WITHDRAWAL APPLICATION
After submitting an application to withdraw from the Composition levy, it is mandatory to file a Stock Intimation. Following this, you must submit a statement in FORM GST ITC-01, providing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by you on the date when the option is withdrawn or denied. This must be completed within thirty days from the date the option is withdrawn.
APPROVAL FROM GST DEPARTMENT
You do not require approval from State or Centre Tax Authorities to withdraw from the Composition levy. Upon filing the application to withdraw, it is auto-approved immediately, and you are opted out of the Composition levy without delay.
MORE GSTIN AND ONE PAN
Withdrawing from the Composition Levy for any of your GSTINs will automatically remove you from the Composition Levy for all GSTINs linked to the same PAN.
RETROSPECTIVE WITHDRAWAL OF COMPOSITION LEVY
Depending on your reason for withdrawal, you can opt out of the Composition Levy on a past or future date.
If you select “Voluntary” as the reason for withdrawal:
If the reason for withdrawal is other than “Voluntary”:
Upon withdrawal from the composition levy, you are required to file Form GST ITC-01 to provide details of your stock.
GST RETURNS FILED BY TAXPAYERS OPTED FOR COMPOSITION SCHEME
The GSTR returns can be filed in two ways for the taxpayers opted for the Composition Scheme:
The GSTR-4 (Annual Return) filing plan was designed for small taxpayers who opt for the Composition Scheme. While the CMP-08 is filed monthly, the GSTR-4 is now required to be filed only once annually.
Form GST CMP-08 is utilised for declaring the details or summary of self-assessment tax, payable for a specific quarter by taxpayers under the composition scheme or those who opt for the composition levy. It is submitted quarterly, with the due date for filing set as the 18th of the month following the quarter, or any extended period announced by the Government through notification.
On the other hand, Form GSTR-4 is filed once annually for each financial year by taxpayers who have opted for the composition scheme during that period, starting from 1st April, 2019 onwards. It is submitted on an yearly basis, thus shall be filed by 30th of the month succeeding the financial year.
FORM GST CMP-04 : GUIDE TO FILE THE FORM IN GST PORTAL
To withdraw from the Composition Levy on the GST Portal, perform the following steps:
Note: If your Annual Aggregate Turnover for the current financial year has exceeded the quantum specified, then following Warning message to opt out of composition levy will be displayed on the dashboard, post login.
Click the OK button and you will be navigated to Intimation/Application for Withdrawal from the Composition Levy page. Click the CANCEL button to access other functionalities even if turnover has exceeded the composition limit.
OR, alternatively you can follow these steps:
1. Access the www.gst.gov.in URL. The GST Home page is displayed.
2. Login to the GST Portal with valid credentials.
3. Click the Services > Registration > Application for Withdrawal from Composition Levy link.
The Intimation/Application for Withdrawal from Composition Levy page is displayed.
4. Select the Date from which withdrawal from Composition Levy is sought using the calendar. Date for withdrawal from Composition Levy cannot be before the date on which Composition Levy has been opted.
5. Select the Reason for withdrawal from Composition Levy from the drop-down list.
6. Select the Verification checkbox.
7. In the Name of Authorised Signatory drop-down list, select the name of authorised signatory.
8. In the Place field, enter the place where the form is filed.
9. Click the SAVE button to save the data.
After filling the application, you need to digitally sign the application using Digital Signature Certificate (DSC) or EVC.
In Case of DSC:
a. Click the SUBMIT WITH DSC button.
b. Click the YES button.
c. Select the certificate and click the SIGN button.
In Case of EVC:
a. Click the SUBMIT WITH EVC button.
b. Enter the OTP sent to the email and mobile number of the Authorised Signatory registered at the GST Portal and click the VALIDATE OTP button.
Upon successful submission, a confirmation message will appear, and you will receive an acknowledgment within the next 15 minutes via your registered email address and mobile phone number. Additionally, the Application Reference Number ( ARN ) receipt will be sent to both your email address and mobile phone number.
Once the application to withdraw from the Composition Levy is filed, the application is auto approved and you are taken out of the Composition Levy.
Note: After withdrawal from the Composition Levy, you can verify the change in your Taxpayer Type to Regular from Composition in My Profile, granting access to all returns applicable to Regular taxpayers.
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