Last day to apply for GST composition scheme- Low tax, No hassles!

Today is the last day to opt into the composition scheme for the upcoming financial year FY 2022-23 under the GST law. A taxpayer registered as a composition dealer under GST needs to pay nominal taxes on the sales. There are benefits involved, such as paying taxes once a quarter and filing only one return.

If a taxpayer has already joined the scheme in the previous year, it need not be applied again. Whereas, if it’s a new application, the business wishing to opt into the scheme from FY 2022-23 can apply on the GST portal within the deadline. Interested taxpayers must submit Form CMP-02 on Thursday, 31st March 2022, on the GST portal.

Small business owners such as shopkeepers, retailers, grocery vendors and small trading and manufacturing businesses benefit from this simplified tax filing facility. The GST rates include 1%, 5% and 6% of the total turnover of the business. According to the Centre, the composition scheme would save taxpayers from several compliance rules, reduce their accounting tasks, and provide a reduced tax levy.

Eligibility of businesses to opt into the Composition scheme

Under the composition scheme, those supplying goods with a total annual turnover of up to Rs.1.5 crore can opt into the scheme and pay nominal taxes for the upcoming FY 2022-23. At the same time, those supplying services may opt into the scheme if their total turnover is up to Rs.50 lakhs in that year. However, some exceptional cases where businesses cannot go for the composition scheme. These include businesses selling pan masala or tobacco, ice cream makers, e-tailers, non-resident taxable persons, tax deductors or collectors and inter-state suppliers.

Tax rates and compliance for composition taxpayer

The GST rates vary from 1% to 6% of the total turnover of the business. It depends on the type of business. For example, restaurants not selling alcohol will be taxed at 5% GST. For product manufacturers and retailers, 1% GST will apply, whereas, for service providers, the GST rate is fixed at 6%. 

The taxable composition persons must submit a challan-cum-statement every quarter in Form CMP-08 while paying taxes due on or before the 18th of the month following the quarter. At the end of the financial year, they must file Form GSTR-4 by 30th April following the financial year, also known as the annual returns. It will have all the details of sales carried out, tax liabilities and payment details throughout the financial year.

Steps to file intimation to opt into composition scheme

A taxpayer can join the scheme by following three simple steps:

Step 1: They must log in to the GST portal at www.gst.gov.in. If they do not have one, they must sign up.

Step 2: Visit the‘ Services’ section on the top and select the ‘Registration’ option. They must finally choose the ‘Application to Opt for Composition Levy’ option.

Step 3: Enter all details asked in the Form GST CMP-02. After that, select the ‘Declaration’ and ‘Verification’ checkboxes. Enter the name of the authorised signatory, type in the place, click on the ‘Save’ button and submit the form.

What must be done after filing CMP-02?

They must file Form ITC-03 by 31st May 2022 (within 60 days from the beginning of the new financial year). All the newly joined composition taxable persons have to disclose and report the GST paid on purchases, including the value of the stock of raw materials or finished goods so purchased from both GST registered and unregistered persons. The stock shall be counted as of the day before opting into the composition scheme.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in