Businesses that choose to opt for a simplified way of paying their GST (Goods and Services Tax) have time until Thursday, March 31, to apply for the central government’s GST Compensation Scheme. Under the scheme, suppliers of both goods and services with aggregate annual turnover of upto Rs 1.5 crore can opt in for the scheme, to pay taxes for the upcoming FY 2023.

Small businesses such as manufacturers of goods, dealers and restaurants (not serving alcohol) can opt for the scheme. For instance, fruits and vegetable vendors, shopkeepers, and small trading and manufacturing businesses can reap benefits from this simplified tax filing scheme. According to the central government, this scheme will help taxpayers to save on numerous compliance norms, lessen their bookkeeping work, and offer reduced tax rates.

However, taxpayers opting for the scheme will have to pay tax and furnish a statement every quarter and fill up the GST CMP-08 form with details. They also have to furnish a return for every financial year under the scheme. If a business has already opted for the scheme in previous year, it would not be needed to apply again, however if it’s a fresh application for the scheme, a tax paying business can apply on the GST portal.

What are the tax rates?

The tax rates range from 1% to 6% of the business’ turnover and vary depending on the type of business. For instance, restaurants which are not serving alcohol will be taxed 5% GST. For goods manufacturers and traders a tax of 1% will be applicable, while for service providers the effective GST tax rate will be 6%.

Who is eligible for the GST Composition scheme?

Supplier of Goods, registered in states such as North-Eastern states and Himachal Pradesh can apply for the scheme if their company’s turnover is up to Rs 75 lakhs, while for all the other states, the companies can apply for the scheme if their turnover is up to Rs 1.50 crore. 

For suppliers of services, if they have dealt with services from the fiscal year 2020 onwards and if their turnover is upto Rs 50 lakhs, they can opt for the scheme.

Who is not eligible for the scheme?

A taxpayer or a taxpaying business cannot opt for the Composition scheme i) if they supply goods which are not liable to be taxed under the GST Act, such as tobacco, pan masala or ice cream makers,ii) if the supplies is through e-commerce operators, iii) if they are non-resident foreign taxpayer, iv) if they are a person registered as TDS deductor/tax collector and v) if they are making inter-state supplies.

What are the steps to avail the scheme?

A taxpayer can opt for the the scheme in three steps:

Step 1: Log in to the Taxpayers’ interface ie www dot Gst dot gov dot in

Step 2: First go to the Services section on top, then select the ‘Registration’ option, and finally select the ‘Application to Opt for Composition Levy’ option.

Step 3: Fill in the GST-CMP-02 form. Also, click on the ‘Composition Declaration’ and ‘Verification’ checkboxes. Fill in the name of authorized signatory, type the place and click on Save. And finally submit the form.

Additionally, file stock intimations

Additionally, a taxpayer would also be needed to submit their stock intimation records within 30 days of opting for the scheme. It would be required to furnish the details of stock including inward supply of goods from unregistered persons, held by the taxpayer on the day preceding the date from which you opt to pay the composition amount. The authorities may not actively check if the taxpayer has submitted the stock intimation but if the intimation is not filed, the business would compulsorily be pushed out of the scheme.