A Thorough Guide to the GST Composition Scheme
Learn about the latest changes, filing processes, and essential regulations for the GST Composition Scheme to maintain compliance and optimize your tax responsibilities.

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Created: 10th July, 2025 10:42 AM, last update:10th July, 2025 10:42 AM
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Introduction to the GST Composition Scheme
The Goods and Services Tax (GST) Composition Scheme aims to ease tax compliance for small enterprises and taxpayers. This scheme permits eligible taxpayers to remit a fixed percentage of their turnover as tax, thereby reducing the compliance burden associated with intricate GST procedures. Grasping the rules and updates related to this scheme is crucial for taxpayers seeking to enhance their tax responsibilities.
Recent Updates on the GST Composition Scheme
Staying informed about the latest updates is essential for ensuring compliance and leveraging any available benefits. Here are some recent changes:
- Extended Deadlines: As of July 2022, the deadline for filing GSTR-4 for the fiscal year 2021-22 has been extended, with a late fee waiver available until July 28, 2022.
- Waivers on Late Fees: The late fee for GSTR-4 submissions has been waived for those who filed between May 1 and June 30, 2022, as per CGST Notification no. 7/2022.
- Mandatory Declarations: Taxpayers interested in the Composition Scheme for FY 2022-23 were required to submit a declaration via Form CMP-02 by March 31, 2022.
- Interest Relief Measures: Interest relief for delayed CMP-08 filings during the January-March 2021 quarter has been introduced, along with an extension for GSTR-4 for FY 2020-21 until July 31, 2021.
Intimation and Effective Date for Composition Levy
For Existing Taxpayers
Taxpayers registered under the pre-GST regime wishing to opt for the Composition Levy must file an electronic intimation using FORM GST CMP-01 within 30 days of the appointed date. Failure to comply means that the registered individual cannot collect taxes and must issue a bill of supply for the goods supplied. Additionally, FORM GST CMP-03 must be submitted within 60 days, detailing stock and inward supply details of goods received from unregistered persons.
For New Registrations
Individuals seeking new registration under the GST Composition Scheme must complete the intimation process using FORM GST REG-01.
Transitioning from Regular GST to Composition Scheme
Registered taxpayers wishing to switch to the Composition Scheme must take the following steps:
- Submit FORM GST CMP-02 to opt into the scheme.
- Provide a statement in FORM GST ITC-3 detailing the input tax credit (ITC) related to inputs in stock and semi-finished or finished goods within 60 days from the beginning of the relevant financial year.
When Does the Composition Levy Commence?
The effective date for tax payment under the Composition Scheme varies based on the taxpayer's situation:
- Existing taxpayers registered before GST will have their effective date based on the appointed day.
- Those switching to the scheme will see the effective date as the day they file their intimation.
- New registrations will commence from the date of registration if the application is submitted within thirty days of the liability for registration.
Conditions and Restrictions for Opting into the Composition Scheme
To qualify for the Composition Scheme, certain conditions must be fulfilled:
- The taxpayer cannot be a casual taxable person or a non-resident taxable person.
- Goods in stock as of the appointed date must not have been procured from outside the state.
- The goods must not be classified as interstate purchases, imported items, or those from branches and agents located outside the state.
- If dealing with unregistered persons, tax must be paid; otherwise, no stock should be held.
- It’s mandatory to state on invoices that the individual is a “composition taxable person, not eligible to collect tax on supplies.”
- Notices and signboards must clearly display the term “Composition Taxable Person.”
- Individuals must not be manufacturers of goods as notified by the Government in the preceding financial year.
Conclusion
Understanding the rules and updates surrounding the GST Composition Scheme is crucial for small enterprises aiming to streamline their tax processes and ensure compliance. Staying informed about filing requirements and eligibility conditions will help taxpayers maximize the benefits of this advantageous scheme. For more information on compliance, consider exploring our MSME Registration Process in India or check out our CompaniesInn - AI-Powered Legal & Business Services for assistance with your business needs.
Frequently Asked Questions
What is the GST Composition Scheme and who can benefit from it?
The GST Composition Scheme is designed to simplify tax compliance for small businesses and taxpayers. Under this scheme, eligible taxpayers can pay a fixed percentage of their turnover as tax, which significantly reduces the complexity of GST filing. This scheme is particularly beneficial for small enterprises with a turnover below a specified threshold (currently ₹1.5 crore for most states). By opting into this scheme, businesses can save time on compliance, avoid lengthy paperwork, and focus more on their core operations. However, eligibility comes with certain conditions, such as not being a casual or non-resident taxable person, and ensuring that the goods sold do not include interstate purchases or imports.
What are the recent changes in the GST Composition Scheme?
Recent updates to the GST Composition Scheme include extended deadlines for filing GSTR-4 and waivers on late fees for submissions made between May 1 and June 30, 2022. Taxpayers opting for the Composition Scheme for FY 2022-23 were also required to submit a declaration in Form CMP-02 by March 31, 2022. Additionally, interest relief measures were introduced for delayed CMP-08 filings from the January-March 2021 quarter. Staying up-to-date with these changes is crucial for ensuring compliance and making the most of the available benefits, so it's wise to regularly check the official GST updates.
How can existing taxpayers switch to the GST Composition Scheme?
For existing taxpayers looking to switch to the GST Composition Scheme, the process begins with filing FORM GST CMP-02 to opt into the scheme. This must be done within 30 days of the appointed date. Additionally, taxpayers need to submit FORM GST ITC-3, which details the input tax credit for goods in stock, within 60 days from the start of the financial year. It's important to ensure that all conditions for eligibility are met, including proper documentation and compliance with the requirements. Failure to follow these steps may result in complications, so make sure to keep track of deadlines.
What are the filing requirements for new registrations under the GST Composition Scheme?
If you're registering newly under the GST Composition Scheme, you need to complete the intimation process using FORM GST REG-01. This form should be submitted during the registration process and must be done within 30 days from the date when the liability to register arises. Once registered, taxpayers must also comply with the ongoing filing requirements, including GSTR-4, which is filed quarterly. Keeping your records in order and being proactive about filing will help you avoid penalties and ensure that you benefit fully from the scheme.
What are the conditions and restrictions for opting into the GST Composition Scheme?
To qualify for the GST Composition Scheme, several conditions must be satisfied. For starters, taxpayers should not be casual or non-resident taxable persons. The goods in stock as of the appointed date must not be sourced from outside the state, and interstate purchases or imports are not allowed. Taxpayers must ensure they don’t hold stock obtained from unregistered persons without paying the required tax. Additionally, invoices must clearly state that the seller is a 'composition taxable person' who cannot collect tax on supplies. These requirements help maintain clarity and compliance, so it’s crucial to understand them before opting into the scheme.
What happens if I miss the deadline for submitting Form CMP-02?
If you miss the deadline for submitting Form CMP-02, which is necessary to opt into the GST Composition Scheme, you may lose the opportunity to benefit from the scheme for that financial year. This could mean that you will have to comply with the regular GST filing requirements, which are generally more complex and time-consuming. It's essential to keep track of deadlines and submit your forms on time. If you've missed a deadline, consider consulting a tax professional who can advise you on possible next steps and any options that might be available to you.
How can I stay informed about changes to the GST Composition Scheme?
Staying informed about changes to the GST Composition Scheme is crucial for compliance and maximizing benefits. One effective way to do this is by regularly checking the official GST portal for updates and notifications. Additionally, subscribing to newsletters from reputable tax advisory firms or following relevant financial news sources can keep you in the loop. Joining professional groups or forums where business owners discuss GST issues can also provide valuable insights. Remember, being proactive in gathering information can help you navigate any changes smoothly and maintain compliance.
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