What you need to know about the GST Composition Scheme

Back in 2017, India brought the Goods and Services Tax (GST) into effect. It was introduced and implemented to subsume indirect taxes under the old tax regime, under which the consumer would face the brunt of double taxation. These indirect taxes include VAT, Service Tax, Entertainment Tax, Sales Tax, Excise, and so forth. GST is a single unified tax that the consumer has to pay the central government on the purchase of taxable goods and services.

The advent of GST has simplified the process of tax calculations and filing. The three types of GST that you have to pay on goods and services are the Central Goods and Service Tax (CGST), State Goods and Service Tax (SGST), and the Integrated Goods and Service Tax (IGST). CGST and SGST are imposed by the central and state governments, respectively, on transactions that take place within a state, whereas the central government imposes IGST on supplies that take place between states.

What Is The GST Composition Scheme?

Qualified taxpayers can avail the GST composition scheme. If you are a business owner or vendor and yield an annual turnover of less than Rs. 1.5 CR in a financial year, you are eligible for this scheme.

It saves you the trouble of handling GST-related documentation and paperwork. The GST composition scheme makes it significantly easy to make GST tax payments for relatively smaller businesses.

The composition scheme under GST has a few benefits compared to standard GST filing. These benefits are primarily a noticeable reduction in documentation or paperwork and less overall compliance and low tax liability. You ought to pay taxes at a fixed rate of 1 -6% of your taxable income once you complete your GST registration process.

Do you qualify for the Composition Scheme under GST?

Firstly, you need to keep in mind that you qualify for the GST composition scheme on the condition that you bring in a yearly revenue of less than Rs. 1.5 CR. According to the 2018 CGST act, a composition dealer is allowed to offer services for up to 10% of the sale or Rs. 5 Lakh, depending on which of the two is higher.

The GST council made an announcement saying they were planning to increase the turnover threshold for service providers in 2019. However, there exist a few groups that do not qualify for the GST composition scheme. Those groups are:

  • Manufacturers that deal Tobacco, pan masala, and ice cream
  • Non-resident taxable persons
  • Businesses that supply goods and services using an E-commerce operator
  • A product and service supplier making deliveries between states
  • Casual taxable persons

What is the Turnover Threshold for Goods and Services Providers to Qualify for the GST Composition Scheme?

You must know that the threshold for the composition scheme under GST is based on your type of business.

Traders And Manufacturers of Goods

Your yearly turnover in the current financial year must not pass Rs. 1.5 CR if you want to use the composition scheme under GST as a company that has only recently completed the GST registration process under the GST regime. Your turnover during the past financial year should not have exceeded Rs if you are a relatively older business. 1.5 CR. Also, this does not apply to non-alcohol serving restaurants.

Service Providers

Similar to traders and manufacturers, your annual turnover during the financial year must not exceed Rs. 50 Lakh, if you are a new business and have registered for GST recently. However, if you are a relatively older business, your sales during the previous financial year must not have crossed Rs. 50 Lakh.


You are probably new to GST and the GST composition scheme. However, this quick guide should simplify things for you enough to get started and help you determine where you stand with your business. You also need to be aware of the stipulated terms and conditions, the type of business you are running, and take into account all the other factors that may affect your business and check if you are eligible.