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GST Return Filings

GST Return Under The Composition Scheme

The composition Scheme is available to taxpayers with a turnover of less than ₹ 1.5 crore. The limit is ₹75 lakh in the case of North-Eastern states and Himachal Pradesh.

The Goods and Services Tax is an indirect taxation method that has significantly simplified Indian taxation laws. GSTR-4 is the GST return filing meant for composition dealers, a scheme available under the GST regime to certain types of taxpayers. The GST return for the composition scheme must now be filed annually, whereas it was previously filed quarterly. The purpose of this article is to discuss the GST annual return for composition dealers, the composition scheme, and why they are important.

What Is GSTR-2A?

The GST portal automatically generates GSTR 2a return for all businesses based on their purchases. Traders record their GSTR 1s so that GSTR 2As can be created. The GSTR 2As take information about goods and services acquired by the seller during a given month.

What Is GSTR-3?

Detailed information about transactions, purchases, sales during the month, along with the GST liability, is maintained in the gstr 3 filing (Goods and Service Tax Return). Auto-generation of this return is based on the data extracted from GSTR-1 and GSTR-2. Additionally, GSTR-3 will show GST liability for the month. Paying the tax and registering the return are the taxpayer’s responsibilities. GST-enrolled and GST-registered taxpayers with 15-digit PAN-based GSTINs are required to file or register the GSTR-3.

What Is GSTR – 4?

GSTR-4 is the GST return form for composition dealers. Unlike regular taxpayers, who must file up to three returns per month, composition dealers must only file one return per year in the form of GSTR-4. In most cases, the deadline for filing the GST competition return is April 30th, following the assessment year. All taxpayers who have chosen the Composition Scheme under the GST regime are required to file GSTR – 4.

What Is GSTR – 5A?

An OIDAR (Online Information and Database Access or Retrieval) return is required by OIDAR service providers who provide services to non-taxable persons in India from outside the country. There is no requirement to register gstr 5a return if there has been no business activity (NIL return) during the tax period. It must be registered by the date the commissioner may announce or by the 20th following the tax time to which the return compares. The GSTR 5A can only be registered if all taxes and additional obligations have been paid for the preceding tax period.

Things to Know About the GST Return for the Composition Scheme

  1. The GST portal now offers an offline Excel-based tool to help taxpayers file their annual GSTR-4 return on time. The facility for GST composition return filing was added to the GST portal only in August of 2020. 
  2. The due date to opt for the composition scheme in the assessment year 2020-2021 by filing form CMP-02 was extended to 30 June 2020. This will apply to taxpayers registered under both Section 10 of the CGST Act and those who will opt-in through the CGST notification that came out on 7 March 2019.

Eligibility Criteria for the Composition Scheme Under the GST Regime

Businesses that make more than INR 1.5 crore in a year may apply for the Composition Scheme. The threshold was initially set at INR 1 crore per year, which the CBIC later amended to INR 1.5 crores in 2019. Businesses must consider the turnover of all businesses that use the same PAN card in calculating the total annual turnover. The government will consider the aggregate turnover when considering the eligibility of the business for the Composition Scheme. Additionally, only the following type of business entities may opt for the composition scheme under the GST regime;

  1. Manufacturers 
  2. Dealers
  3. Restaurants that do not serve alcohol

You can use our GST calculator to know how much GST you owe before you register.

The following individuals cannot opt for the Composition Scheme under the GST regime;

  1. Manufacturers of ice cream, tobacco and pan masala
  2. Individuals making inter-state supplies
  3. Casual taxpayer
  4. Non-resident taxpayer
  5. Businesses that use an e-commerce operator to supply goods

Composition Scheme Under the GST Regime

Let us now take a quick look at a few things you need to keep in mind about the Composition Scheme. 

  1. Composition dealers must pay tax under the reverse charge mechanism wherever it is applicable. The rate for the supplies produced will be the rate at which the dealer has to pay the GST. Hence, the rate under the scheme cannot be used to pay taxes under the reverse charge mechanism. 
  2. Composition dealers cannot avail of any input tax credit, better known as ITC for the tax they paid under the reverse charge mechanism.
  3. Such dealers do not have to pay the IGST since they have to only pay the CGST and SGST for the import of services or goods from an unregistered dealer under the reverse charge mechanism.
  4. Composition dealers have to pay tax at a specific rate on their total sales. They must also pay tax under the reverse charge mechanism for certain purchases. Hence the total GST payable = tax on supplies + tax on B2B transactions (reverse charge) + tax on unregistered dealer B2B purchases + tax on import of services
  5. Unlike a normal taxpayer, composition dealers do not have to maintain detailed records of all their financial transactions. However, they must issue bills of supply and not tax invoices, as the dealer pays the tax out of his pocket. Such dealers cannot recover the GST paid from their customers.

GST Returns for Composition Dealers

Composition dealers need to file the following returns under the GST regime.

  1. Taxable individuals must pay tier taxes via a challan-cum-statement from 2019 onwards in the form of CMP-08.
  2. From the assessment year 2019-2020, the frequency of filing GSTR-4 has been changed from a quarterly to an annual basis.
  3. Filing of GSTR – 9A will continue to apply with certain exemptions for assessment years 2017-2018 and 2018-2019

Taxpayers need to be very careful while filing the GST annual return for composition dealers as it cannot be revised once filed on the portal: Hence, it is advisable that such dealers take the help of legal experts before filing GSTR4. Any delay in filing the GST return for composition dealers will attract a late fee of INR 200 per day. However, the maximum fine that can be levied is INR 5000.

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