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Drawbacks of Registering under Composition Scheme

Composition scheme is very useful to enable small taxpayers to reduce the burden of compliance. However, under the current scenario a small taxpayer has to act very consciously if he chooses to get registered under the composition scheme. The same seems to be continuing under the GST Regime as well.

The following are the conditions and restrictions for composition levy as per GST law -:

1. The person should neither be a casual taxable person nor a non-resident taxable person.

2. The goods held in stock on the appointed day had not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 1 of Composition Rules.


3. The goods held in stock by him have not been purchased from an unregistered person and where purchased, he pays the tax under reverse charge basis in compliance of sub-section (4) of section 9;


4. The person shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both received from un-registered persons;

5. The person shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him


6. The person shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.  


7. The taxable person who has paid tax under composition scheme even when not being eligible will be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty.


        Thus, in the light of the above points we can say that only those who are selling to consumers in the last mile of the supply chain would find Composition worthwhile.

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