The Goods and Services Tax (GST) framework provides a Composition Levy scheme for eligible taxpayers seeking a simplified tax compliance process. This guide outlines the key details, eligibility, and process for opting for Composition Levy under GST for the financial year 2025-26.
What is the Composition Levy under GST?
The Composition Levy is a simplified taxation scheme designed for small businesses. It allows eligible taxpayers to pay a fixed percentage of turnover as tax, reducing compliance burdens. However, it comes with specific conditions and restrictions.
Who Can Opt for the Composition Levy?
You can opt for the Composition Levy if you are a regular taxpayer with an aggregate annual domestic PAN-based turnover within the threshold limit prescribed by GST laws. However, certain businesses and transactions are not eligible.
You Cannot Opt for Composition Levy If You:
- Supply goods that are not taxable under GST.
- Make inter-state outward supplies of goods.
- Conduct business through e-commerce operators liable to collect tax under Section 52.
- Manufacture notified goods.
- Operate as a casual dealer or non-resident foreign taxpayer.
- Are registered as an Input Service Distributor (ISD), TDS Deductor, or Tax Collector.
How to Opt for Composition Levy (Existing Taxpayers)?
If you are already registered as a regular taxpayer, follow these steps to opt for the Composition Levy:
- Log in to the GST Portal: Visit GST Portal and sign in to your taxpayer account.
- Navigate to Application: Go to Services > Registration > Application to Opt for Composition Levy.
- Complete and Submit Form CMP-02: Fill in the required details and submit the form before the deadline (March 31, 2025, for FY 2025-26).
When Can You Opt for the Composition Levy?
The timeline for opting for the Composition Levy varies for new and existing taxpayers:
- New Taxpayers: Must opt for the scheme while filing a new GST registration using Form GST REG-01.
- Existing Taxpayers: Must submit Form GST CMP-02 before the financial year begins (latest by March 31, 2025, for FY 2025-26).
Do Existing Composition Taxpayers Need to Reapply?
If you are already availing of the Composition Scheme, you do not need to file a fresh application. However, you must continue complying with scheme conditions and restrictions.
Is Stock Intimation Mandatory?
Yes. Taxpayers opting for the Composition Levy must file a stock intimation using Form ITC-03 within 60 days from the date of opting into the scheme.
Failure to comply may lead to conversion back to the regular taxation scheme.
Can You Save the Composition Levy Application?
Yes, you can save the application for up to 15 days before submitting it. Access saved applications under My Saved Applications in the GST Portal.
Can Service Providers Opt for the Composition Levy?
Yes. From FY 2019-20 onwards, service providers can opt for the Composition Scheme under specified conditions.
What Returns Must a Composition Taxpayer File?
Composition taxpayers must file the following returns:
- Quarterly Payment Statement (Form GST CMP-08).
- Annual Return (Form GSTR-4).
Can You Opt for Composition Levy if One GSTIN Under the PAN is SEZ?
No. If any GSTIN under your PAN is registered as an SEZ Unit/SEZ Developer, you cannot opt for the Composition Levy.
Deadline for Opting for Composition Levy in FY 2025-26
Taxpayers can apply for the Composition Scheme for FY 2025-26 via the GST Portal from February 4, 2025, to March 31, 2025, by filing Form CMP-02.
Final Thoughts
The Composition Levy is a beneficial scheme for small businesses seeking simplified GST compliance. Ensure you meet eligibility criteria and file the necessary forms within the stipulated deadlines to avail of its benefits.
For the latest updates, visit the GST Portal.
FAQs on Composition Levy Under GST
Q1: Can I opt for the Composition Levy if I deal in services?
A: Yes, from FY 2019-20 onwards, service providers can opt for the Composition Scheme.
Q2: Is filing Stock Intimation mandatory?
A: Yes. Stock details must be submitted in Form ITC-03 within 60 days of opting for the scheme.
Q3: How can I switch from a regular GST scheme to the Composition Scheme?
A: File Form GST CMP-02 on the GST Portal before the start of the financial year.
Q4: What returns do Composition Taxpayers need to file?
A: GST CMP-08 (quarterly) and GSTR-4 (annually).
Q5: Can I apply for the Composition Scheme if I supply goods via e-commerce?
A: No, businesses selling through e-commerce operators liable for TCS under Section 52 cannot opt for this scheme.
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This article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc if any.
Published on: March 6, 2025