Goods and Service Tax (GST) Online Registration
The Goods and Services Tax (GST) is a comprehensive, multi-stage tax on the sale of goods and services, implemented to replace various indirect taxes with a single unified tax system. It is designed to streamline the taxation process and reduce tax evasion, making it easier to administer and comply with.
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Four Steps to Get GST Certificate
Overview of GST
The Composition Scheme under GST in India offers a simplified tax regime for small businesses, allowing them to pay GST at a reduced rate rather than the standard rates. It’s designed for businesses with an annual turnover of up to ₹1.5 crore, aiming to lessen the compliance burden and simplify the tax process. This scheme is particularly beneficial for small traders, manufacturers, and restaurants which meet the specified turnover criteria.
However, opting for the Composition Scheme restricts businesses from making inter-state sales and from claiming input tax credit. Businesses enrolled in this scheme are also required to pay taxes on a quarterly basis and file returns annually, which simplifies the administrative tasks significantly. They must also comply with the condition of not collecting any GST from their customers, which means the tax cost is borne by the business itself. This scheme helps in reducing the paperwork and compliance costs for eligible small businesses.
Advantages & Disadvantages
The following documents need to be scanned and attached for Composition scheme registration
Simplified Tax Compliance
Reduces the burden of tax compliance with fewer filings and paperwork.
Lower Tax Rates
Offers lower tax rates compared to the standard GST rates, reducing tax liability.
Minimal Record-Keeping
Requires less rigorous record-keeping, easing the administrative load on businesses.
Increased Cash Flow
Frees up cash by lowering tax outlays and simplifying financial management.
Cost-Effective
Reduces the cost associated with tax administration and professional fees.
Ease of Doing Business
Simplifies the process of tax calculation and payments for small businesses.
Advantages & Disadvantages
The following documents need to be scanned and attached for Composition scheme registration
No Inter-State Sales
Prohibits businesses from making inter-state sales, limiting market reach.
Ineligibility for Input Tax Credit
Businesses cannot claim input tax credit, potentially increasing costs.
Turnover Limitation
Applicability is limited to businesses with a turnover below a certain threshold.
Cannot Collect GST
Businesses cannot charge GST to customers, which may affect pricing strategies.
Limited Business Scope
Not all businesses qualify; the scheme excludes certain service providers and manufacturers.
Periodic Restrictions
Once opted in, businesses must comply for the financial year, limiting flexibility.
Under the GST composition scheme, businesses can opt-in for goods or services, each with distinct conditions and turnover limits. Goods suppliers and service providers, excluding restaurants, face different eligibility criteria based on their respective turnover thresholds.
Note: The composition scheme option for goods and services will cease to be available to a registered person from the day their aggregate turnover during a financial year exceeds the threshold limits.
Persons Not Eligible to Opt for Composition Scheme
The person exercising the option to pay tax under composition scheme shall not engage in the following activities
- Suppliers engaged in supplying goods or services that are not subject to tax.
- Suppliers making any inter-state outward supplies of goods or services.
- Persons supplying any services through an electronic commerce operator who is required to collect tax under Section 52.
- Manufacturers of ice cream, pan masala, tobacco and aerated waters; manufacturers of aggregate, fly ash blocks, bricks of fossil meals or similar siliceous earths, building bricks, earthen or roofing tiles.
- Suppliers who are either casual taxable persons or non-resident taxable persons.
Note: There is no restriction on composition supplier to receive inter-state inward supplies of goods or services.
Restrictions for Composition levy
Persons opting for composition scheme has to comply with the following restrictions
- Tax Collection : A composition dealer cannot charge GST on outward supplies.
- Input Tax Credit : A composition dealer is not eligible to claim Input Tax Credit (ITC).
- Invoicing : A composition dealer cannot issue a tax invoice; instead, they must issue a bill of supply.
- Display Requirements : A composition dealer must display a notice at their business premises indicating they are a composition taxable person.
Note: There is no restriction on composition supplier to receive inter-state inward supplies of goods or services.
Documents for GST Application
The following documents need to be scanned and attached for GST registration
Photographs of proprietor, partner, Trustees, CEO, MD/WTD, Karta
Bank account-related proof: Scanned copy of cancelled cheque
Constitution of business: Partnership deed or registration certificate
Authorization in the prescribed form (as provided in form GST REG-01)
Proof of address of Principal Place of Business: Ownership details, rent/lease agreement, electricity bill, property tax receipt
Email ID and Mobile Number
GST Registration procedure
Registration under the composition scheme in GST
Before applying, ensure your business qualifies for the Composition Scheme. This includes checking turnover thresholds and the nature of goods or services provided, as certain goods and services are not eligible under this scheme.
Begin by visiting the official GST portal (www.gst.gov.in). If you are already registered under GST, you’ll continue with your existing credentials; if not, you’ll need to complete the registration process first.
- Navigate to the ‘Services’ tab, then to ‘Registration’ and select ‘Application to Opt for Composition Levy’.
- For new taxpayers: During the GST registration process, opt for the Composition Scheme by filling in the relevant section in Form GST REG-01.
- For existing taxpayers: File Form GST CMP-02 on the GST portal to switch to the Composition Scheme. This should be done prior to the commencement of the financial year for which you want to opt for the scheme.
Read the information carefully, fill out the necessary declarations, and verify the details.
- The form can be submitted using a Digital Signature Certificate (DSC) for companies and LLPs, or through other specified means for different types of businesses.
- After submission, you will receive a confirmation and an acknowledgment on your registered email and mobile number.
If you are converting from a regular scheme to the Composition Scheme, you need to file details of the stock held on the date preceding the switch to the Composition Scheme using Form GST CMP-03.
Post Registration Compliances
After registering under the GST Composition Scheme, businesses must adhere to specific post-registration compliances to maintain their eligibility and benefits under the scheme
Businesses must pay tax quarterly using Form GST CMP-08 and file it by the 18th of the month following the quarter’s end. This eases the regular monthly filing requirement that applies to normal taxpayers under GST.
Taxpayers are required to file an annual return using Form GSTR-4 by the 30th of April following the end of the financial year.
On opting for the Composition Scheme, particularly when switching from the regular scheme, businesses must declare their stock using Form GST ITC-03.
If a business wishes to withdraw from the composition scheme or becomes ineligible (e.g., due to crossing the turnover threshold), they must file Form GST CMP-04 within 7 days of such eventuality and file a statement in Form GST ITC-01 within 30 days if they intend to claim ITC on stock.
Businesses need to ensure their turnover does not exceed the prescribed threshold (Rs. 1.5 crore nationally and Rs. 75 lakh for special category states), beyond which they must switch to the regular tax scheme.
