GST Composition Scheme Turnover Limit: A Comprehensive Guide

GST Composition Scheme Turnover Limit: The turnover limit for businesses to be eligible for the Composition Scheme under the Goods and Services Tax (GST) in India is ₹1.5 crore. This turnover threshold determines which businesses can opt for the Composition Scheme and enjoy its simplified compliance and lower tax rates.

GST Composition Scheme Turnover Limits Overview

The table provides a concise overview of the turnover limits for businesses under the GST Composition Scheme. It categorizes the turnover limits based on different business types and regions in India, including general states and North-Eastern states, as well as specific limits for service providers, manufacturers, and traders. This summary helps businesses understand their eligibility for the Composition Scheme based on their turnover and location.

Aspect Turnover Limit
General Turnover Limit for Composition Scheme ₹1.5 crore
Turnover Limit for North-Eastern States ₹75 lakhs (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand)
Turnover Limit for Service Providers ₹50 lakhs (Newly Registered Businesses)
₹50 lakhs (Previously Registered Businesses)
Turnover Limit for Manufacturers ₹1.5 crore (General States)
₹75 lakhs (North-Eastern States, Himachal Pradesh, Uttarakhand)
Turnover Limit for Traders ₹1.5 crore (General States)
₹75 lakhs (North-Eastern States, Himachal Pradesh, Uttarakhand)

Composition Scheme Turnover Limit Key Points

Here are the key points regarding the turnover limit for the Composition Scheme:

  1. Aggregate Turnover: The turnover limit is based on the aggregate turnover of the business. Aggregate turnover includes the value of all taxable supplies, exempt supplies, exports of goods or services, and inter-state supplies made by the business. It excludes taxes and inward supplies received on which reverse charge applies.
  2. ₹1.5 Crore Limit: Businesses with an aggregate turnover of up to ₹1.5 crore in the preceding financial year can opt for the Composition Scheme. This threshold is aimed at supporting small businesses and reducing their compliance burden.
  3. Threshold for North-Eastern States: For businesses operating in the North-Eastern states of India (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura), as well as Himachal Pradesh and Uttarakhand, the turnover limit for the Composition Scheme is ₹75 lakhs.
  4. Ineligible Businesses: Certain businesses are not eligible for the Composition Scheme regardless of their turnover. These include businesses engaged in interstate supplies, making supplies through e-commerce operators, manufacturers of notified goods, service providers (except specified sectors), and casual taxable persons or non-resident taxable persons.

It’s important for businesses to regularly monitor updates from the GST authorities as the turnover limit and other criteria related to the Composition Scheme may be subject to change. Additionally, businesses must carefully evaluate their eligibility and consider factors such as input tax credit, compliance requirements, and tax implications before opting for the Composition Scheme.

Composition Scheme Tax Rates under GST

GST Composition Scheme Turnover Limit After Budget 2024

  1. The Composition Scheme Turnover Limit under GST has remained unchanged in Budget 2024, keeping it consistent with the previous financial year. The turnover threshold stands at ₹1.5 crore, enabling businesses with a turnover of up to this amount to opt for the Composition Scheme.
  2. Moreover, there is a distinct turnover threshold for businesses operating in the North-Eastern states of India, as well as Himachal Pradesh and Uttarakhand. For these regions, the turnover limit for availing the benefits of the Composition Scheme is set at ₹75 lakhs.
  3. In contrast to the amendments introduced in income-tax provisions, particularly in the treatment of agricultural income, the tax rates for FY 2024-25 under the GST Composition Scheme remain unchanged. However, the Finance Act 2024 does incorporate updates to the Central Goods and Services Tax Act, 2017. These updates primarily focus on areas such as Input Service Distributors and penalties related to the failure to register specific machines used in the manufacturing of goods under special procedures. These amendments reflect the ongoing efforts to streamline and enhance the effectiveness of GST regulations while ensuring fair and transparent tax administration.

Components Included in GST Composition Scheme Turnover Limit Calculation

The GST Composition Scheme Turnover Limit refers to the total annual revenue threshold that a business can have to be eligible for the Composition Scheme under the Goods and Services Tax (GST) regime in India. This turnover limit includes various components of a business’s revenue, such as:

  1. Taxable Supplies: This includes the value of all goods and services sold by the business that are subject to GST. It covers both intra-state (within the same state) and inter-state (between different states) supplies.
  2. Exempt Supplies: While exempt supplies are not taxable under GST, their value is still considered when calculating the turnover for the Composition Scheme. Exempt supplies can include certain essential goods, healthcare services, educational services, etc.
  3. Exports and Imports: The turnover limit takes into account the value of goods or services exported by the business (which are zero-rated under GST) as well as any imported goods or services (which are subject to Integrated GST or IGST).
  4. Inter-State Transactions: For businesses involved in inter-state transactions, the turnover from such transactions is also included in the calculation of the turnover limit.
  5. Taxable Services: If the business provides taxable services, the revenue generated from these services is included in the turnover limit calculation.
  6. Non-Taxable Income: Any other non-taxable income sources of the business, such as interest income, rental income, etc., are also factored into the turnover limit.

It’s important to note that certain items are excluded from the turnover calculation for the Composition Scheme, such as taxes and duties levied under GST, inward supplies attracting reverse charge mechanism, and advances received for which invoices have not been issued. These exclusions are specified under the GST laws to ensure an accurate assessment of the turnover for eligibility under the Composition Scheme.

Excluded Items from GST Composition Scheme Turnover Limit Calculation

Exclusions from the GST Composition Scheme Turnover Limit Calculation refer to specific items or types of revenue that are not considered when determining whether a business qualifies for the Composition Scheme under the Goods and Services Tax (GST) framework in India. Understanding these exclusions is crucial for businesses to accurately assess their eligibility and comply with GST regulations. Here are the key exclusions from the turnover limit calculation:

  1. Taxes and Duties: The turnover limit calculation excludes any taxes, duties, cesses, or levies imposed under GST. This ensures that businesses are not penalized for collecting and remitting GST on behalf of the government.
  2. Inward Supplies under Reverse Charge: Revenue generated from inward supplies that attract the reverse charge mechanism is also excluded. Under reverse charge, the liability to pay GST is on the recipient of goods or services rather than the supplier.
  3. Advances without Invoices: Advances received for which invoices have not been issued are not considered in the turnover limit calculation. This prevents double counting of revenue and ensures that only actual taxable supplies are included.
  4. Non-Taxable Income: Any income that is not subject to GST, such as interest income, dividend income, capital gains, etc., is excluded from the turnover limit calculation. This focuses the calculation on the core taxable business activities.
  5. Exports and Supplies to SEZ: Revenue from exports of goods or services and supplies made to Special Economic Zones (SEZs), which are zero-rated under GST, is typically excluded. Zero-rated supplies do not attract GST, so including them in the turnover limit would distort the calculation.
  6. Goods Used for Personal Consumption: If a business purchases goods solely for personal consumption or non-business purposes, the value of such goods is excluded from the turnover limit calculation.

Understanding these exclusions is essential for businesses to ensure compliance with GST regulations and accurately assess their eligibility for the Composition Scheme. It helps prevent miscalculations and ensures that only relevant taxable supplies are considered when determining turnover for GST purposes.

Composition Scheme Under GST – Updated 2024

GST  Composition Scheme Turnover Limit for Services

The turnover limit for service providers to opt for the GST Composition Scheme was as follows:

  1. Newly Registered Businesses: If you are a newly registered service provider, your turnover should not exceed Rs. 50 lakh in the current financial year to be eligible for the Composition Scheme.
  2. Previously Registered Businesses: For service providers who were already registered in the GST system, their turnover must not have exceeded Rs. 50 lakh in the previous financial year to qualify for the Composition Scheme in the current financial year.

It’s important to note that these turnover limits and eligibility criteria are subject to change based on updates and notifications from the GST authorities. Therefore, businesses should verify the latest guidelines on the official GST portal or consult with a tax professional to ensure compliance with the Composition Scheme requirements for service providers.

Turnover Limit for Manufacturers under GST Composition Scheme

Manufacturers are businesses involved in producing or manufacturing tangible goods. The turnover limits for manufacturers to be eligible for the GST Composition Scheme are:

  • Aggregate Turnover Limit (General States): Manufacturers can opt for the Composition Scheme if their aggregate turnover in the preceding financial year does not exceed Rs. 1.5 crore.
  • Aggregate Turnover Limit (North-Eastern States, Himachal Pradesh, and Uttarakhand): For businesses operating in the North-Eastern states of India (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura), as well as Himachal Pradesh and Uttarakhand, the turnover limit for the Composition Scheme is Rs. 75 lakhs.

Turnover Limit for Traders under GST Composition Scheme

Traders are businesses engaged in buying and selling goods without significant processing or alteration. The turnover limits for traders to qualify for the GST Composition Scheme are:

  • Aggregate Turnover Limit (General States): Traders can opt for the Composition Scheme if their aggregate turnover in the preceding financial year is below Rs. 1.5 crore.
  • Aggregate Turnover Limit (North-Eastern States, Himachal Pradesh, and Uttarakhand): For businesses operating in the North-Eastern states of India (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura), as well as Himachal Pradesh and Uttarakhand, the turnover limit for the Composition Scheme is Rs. 75 lakhs.

GST Composition Scheme Turnover Limit Updates Timeline

Here is a timeline summarizing the updates and changes to the turnover limits under the GST Composition Scheme in India:

  1. Pre-GST Era: Before the implementation of GST, there were various turnover-based schemes such as VAT and Service Tax, but there was no specific Composition Scheme as we know it today.
  2. GST Rollout (July 1, 2017):
    • Initially, the turnover limit for the Composition Scheme was set at ₹75 lakhs for all states and Union Territories, except for special category states where the limit was ₹50 lakhs.
    • Manufacturers, traders, and restaurant service providers were eligible to opt for the Composition Scheme.
  3. November 15, 2017: The GST Council raised the turnover limit for the Composition Scheme to ₹1 crore for all states, except special category states where it was increased to ₹75 lakhs.
  4. July 1, 2019: The turnover limit was further increased to ₹1.5 crore for all states and Union Territories.
  5. 2020-2022: During this period, there were no major changes to the turnover limits for the Composition Scheme. The turnover limit remained at ₹1.5 crore for general states and ₹75 lakhs for special category states.
  6. Post-Budget 2023 (Notification No. 28/2023 – Central Tax dated 31.07.2023):
    • The Composition Scheme was extended to suppliers of goods under the e-commerce model, but certain restrictions still applied to service providers through e-commerce.
    • Specific procedures were outlined for e-commerce operators dealing with the supply of goods by tax-paying Composition Dealers.
  7. Post-Budget 2024: As of the latest update, there were no major revisions to the turnover limits for the Composition Scheme. However, businesses should stay updated with official notifications and announcements from the GST authorities for any changes or amendments.

GST Composition Scheme Changes for E-commerce Operators

Here’s a summary based on the information you provided regarding the changes to the GST Composition Scheme and its extension to suppliers of goods under the ecommerce model, as well as the special procedures outlined for E-commerce operators (ECOs) dealing with tax-paying Composition Dealers:

  1. Extension of Composition Scheme to Suppliers of Goods via E-commerce:
    • Previously, registered individuals supplying goods through an E-commerce operator (ECO) did not have access to the benefits of the Composition Scheme. However, after the changes introduced in Section 137 of the Finance Act, 2023, these benefits will now be extended to them.
    • It’s important to note that this extension applies specifically to suppliers of goods. The supply of services through an E-commerce operator is still restricted from availing Composition Scheme benefits.
  2. Special Procedures for E-commerce Operators:
    • The Central Board of Indirect Taxes and Customs (CBIC) issued Notification Nos. 36/2023 – Central Tax, which outlines special procedures that E-commerce operators must follow when dealing with the supply of goods by individuals who are tax-paying Composition Dealers under Section 10 of the CGST Act, 2013.
    • The procedures include:
      • Prohibition of inter-state supply of goods through the E-commerce platform by tax-paying Composition Dealers.
      • Requirement for the E-commerce operator to allow the supply of goods only if an enrolment number has been allotted to the tax-paying Composition Dealer on the common GST portal.
      • Collection of tax at source by the E-commerce operator under Section 52(1) of the CGST Act for the supplies of goods made by the tax-paying Composition Dealer through its platform.

These measures aim to streamline the taxation process and ensure compliance among tax-paying Composition Dealers supplying goods through E-commerce platforms, while also extending the benefits of the Composition Scheme to eligible suppliers of goods.

Leave a Comment