GST Composition Scheme Application (India)

The GST Composition Scheme is a simplified tax payment scheme under Section 10 of the Central Goods and Services Tax Act 2017 (CGST Act) designed for small taxpayers. Under this scheme, eligible registered persons can opt to pay GST at a flat rate on their aggregate turnover instead of the regular GST regime with its complex input tax credit mechanism. The scheme significantly reduces the compliance burden by requiring only quarterly returns (Form CMP-08) and one annual return (Form GSTR-4) instead of monthly GSTR-1 and GSTR-3B filings required under the regular regime. As per Section 10(1) of the CGST Act 2017 and amendments thereto, the following persons are eligible for the Composition Scheme: manufacturers and traders with aggregate turnover not exceeding Rs 1.5 crore in the preceding financial year (Rs 75 lakhs for special category states in the North-East and Uttarakhand); service providers (other than restaurant services) with aggregate turnover not exceeding Rs 50 lakhs under the CGST (Amendment) Act 2018. The composition rates are: 1% for manufacturers (0.5% CGST + 0.5% SGST); 5% for restaurant services (2.5% CGST + 2.5% SGST); and 6% for other service providers and mixed suppliers (3% CGST + 3% SGST) as per Notification No. 14/2019-Central Tax (Rate). Persons not eligible include: suppliers making inter-state outward supplies; suppliers of non-taxable goods; e-commerce operators; manufacturers of notified goods; casual taxable persons; and non-resident taxable persons.

Composition dealers in India under Section 10 of the CGST Act 2017 are subject to several important restrictions and have specific compliance obligations. Key restrictions include: composition dealers cannot collect GST from their customers. The composition tax is paid by the dealer from their own pocket and cannot be recovered from buyers. Therefore, a composition dealer cannot issue a GST tax invoice; they can only issue a Bill of Supply. Composition dealers cannot avail input tax credit on their inward supplies. This means the GST paid on purchases cannot be offset against the composition tax payable. Composition dealers cannot make inter-state outward taxable supplies. They are restricted to intra-state supplies within their state only. If a composition dealer makes an inter-state purchase, they must pay the full GST on the purchase (IGST) but cannot claim ITC. Compliance requirements include: annual intimation (Form GST CMP-02) at the beginning of each financial year to continue in the scheme; quarterly payment of composition tax via Form CMP-08 (statement-cum-challan) by the 18th of the month succeeding the quarter; annual return in Form GSTR-4 by 30th April of the subsequent financial year; display of the board or notice at their place of business indicating that they are a composition taxable person, in a prominent location; maintenance of stock registers and basic accounts; and immediate intimation if the aggregate turnover exceeds the composition threshold.

The procedure for opting in and opting out of the GST Composition Scheme is prescribed under Rules 3 and 4 of the CGST Rules 2017. To opt into the Composition Scheme, a registered taxpayer must file an intimation in Form GST CMP-02 electronically on the GST Portal (gst.gov.in) before the commencement of the financial year in which they wish to avail the scheme. A fresh registration as a composition dealer can also be made by selecting the composition option in Form GST REG-01 at the time of initial GST registration. Once the composition option is exercised, it applies from the first day of the financial year and cannot be changed mid-year. The dealer must also file Form GST ITC-03 within 60 days of the date from which the composition scheme becomes effective, to reverse the input tax credit on closing stock held as on the date of opting in, since composition dealers cannot carry forward ITC. To opt out of the Composition Scheme (voluntarily or on breaching the threshold), the dealer must file Form GST CMP-04 within 7 days of the event causing ineligibility. After opting out, the dealer transitions to the regular GST regime and may avail ITC on their opening stock through Form GST ITC-01. The transition from composition to regular requires filing GSTR-1 and GSTR-3B from the month of opting out and payment of applicable GST under the regular rates. Opting out is also automatic when the aggregate turnover in a financial year exceeds the composition threshold.

A GST Composition Scheme Application (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Central Goods and Services Tax Act, 2017 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.

A GST Composition Scheme Application (India) does not legally require a lawyer in India, though legal advice is recommended. Under Indian law, the Indian Contract Act 1872 governs agreements. The Companies Act 2013 and Registrar of Companies (ROC) regulate corporate documents. The Information Technology Act 2000 governs electronic contracts and data protection. The Consumer Protection Act 2019 provides consumer rights. The Income Tax Act 1961 requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Indian advocate for significant transactions. Under India law, Central Goods and Services Tax Act, 2017, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). Forms-legal.com provides this template as a starting point for India-compliant documentation.