as long as certain conditions are satisfied. The conditions are that the taxpayer remains eligible for GST Composition Scheme or taxpayers do not withdraw from the scheme.According to Sanjay Chhabria, Director, Indirect Tax at Nexdigm, a tax and business consultancy services company, “Taxpayers, including restaurants, with annual aggregate turnover up to Rs 1.5 crore (Rs 75 lakhs for special category States) can opt for GST Composition Scheme. However, for service providers other than restaurants, this turnover threshold has been fixed at Rs 50 lakh.”
What do taxpayers need to do to opt for the GST Composition Scheme?
There are two ways to apply for the GST Composition Scheme- either at the time of GST registration or before the commencement of the financial year for which the scheme is intended to be opted for.
“The composition scheme can be availed at the time of applying for fresh GST registration. However, existing GST registered taxpayers who want to shift to this scheme would mandatorily need to file an intimation using a specified form,” says Chhabria.
Eligible GST-registered taxpayers who want to opt for the GST Composition Scheme are required to file an electronic intimation in Form CMP-02 before the commencement of the financial year for which this scheme is sought to be opted. “Such intimation once filed would remain valid as long as the taxpayer is eligible for the scheme or until the taxpayer withdraws from the scheme,” says Chhabria.
If you are a existing GST registered individual then in order to apply for GST Composition scheme go and login to the GST portal. After go to the Services section and click on ‘Registration’. Next click on ‘Application to Opt for Composition Levy’ and fill up Form CMP-02 and click on ‘Submit’ once done.
Also read: What is GST composition scheme, who is eligible and how to opt for it.
Can taxpayers switch back to the normal GST scheme from the composition scheme?
Experts say that there is no restriction on switching back to the normal GST scheme after opting for the GST Composition Scheme.
“Taxpayers can switch back to the normal GST scheme from the GST Composition Scheme any time during the financial year by filing an intimation for withdrawal in Form CMP-04. After opting out, the taxpayer has to pay taxes as a normal GST taxpayer and issue a tax invoice for every taxable supply made thereafter. Input Tax Credit (ITC) in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock, as well as capital goods can be claimed once he becomes a normal taxpayer,” says Chhabria.
Which taxpayers cannot opt for the GST Composition Scheme?
According to Chhabria, the following category of people are not eligible to opt for the GST Composition scheme:
- A casual taxable person, i.e. a person who occasionally undertakes supplies in a State / UT where he has no fixed place of business;
- A non-resident taxable person, i.e. a person who occasionally undertakes supplies but has no fixed place of business or residence in India;
- A person engaged in providing inter-state supply of goods and/or services;
- A person engaged in non-taxable supplies of goods and/or services;
- A person supplying goods or services through an e-commerce operator who is required to collect tax at source (TCS) as per GST provisions.
Certain special industries have been notified about not being eligible for opting for the GST Composition Scheme. “Government, through the GST Council, has notified that the manufacturers of specific goods such as ice cream, pan masala, aerated water, tobacco, and tobacco substitutes, fly ash bricks, building bricks, earthen or roofing tiles, etc. cannot avail the composition scheme,” says Chhabria.
March 31, 2024 is the Deadline to Opt for GST Composition Scheme for FY 2024-25; Submit CMP-02 Form if Eligible
According to Sanjay Chhabria, Director of Indirect Tax at Nexdigm, businesses such as restaurants with an annual aggregate turnover of up to Rs 1.5 crore (Rs 75 lakhs for special category States) can opt for the GST Composition Scheme. However, service providers other than restaurants must have a turnover threshold of Rs 50 lakh.
To opt for the GST Composition Scheme, taxpayers can apply either during GST registration or before the start of the financial year they wish to participate. Existing GST-registered taxpayers seeking to join the scheme must file an intimation using Form CMP-02. This intimation remains valid as long as the taxpayer is eligible or until they decide to withdraw from the scheme.
If you are an existing GST-registered individual looking to apply for the GST Composition Scheme, log in to the GST portal, navigate to the Services section, choose ‘Registration,’ click on ‘Application to Opt for Composition Levy,’ complete Form CMP-02, and click ‘Submit.’
Experts note that taxpayers can switch back to the regular GST scheme at any time after opting for the GST Composition Scheme by filing an intimation for withdrawal in Form CMP-04. After opting out, they must pay taxes as a regular taxpayer and issue tax invoices for taxable supplies. Input Tax Credit can then be claimed for inputs and capital goods held in stock.
Not all taxpayers are eligible to participate in the GST Composition Scheme, including casual taxable persons, non-resident taxable persons, those engaged in inter-state supply of goods/services, non-taxable supplies, and those supplying goods/services through e-commerce operators subject to TCS. Certain industries, such as manufacturers of specific goods like ice cream, pan masala, and tobacco, are also ineligible for the scheme as notified by the GST Council.
