How to File GST Returns for Composition Scheme Dealers: A Step-by-Step Guide for Indian Businesses
For small business owners in India, navigating the complexities of tax compliance can often feel overwhelming. The Goods and Services Tax (GST) regime, while a landmark reform, introduced its own set of rules and procedures that can be challenging to keep up with. To ease this burden, the government introduced the Composition Scheme, a simpler tax system designed specifically for small taxpayers. For a complete background, our guide to Understanding the Composition Scheme Under GST is an invaluable resource. If you’ve opted for this scheme, you need a clear understanding of how to file GST returns to stay compliant and avoid penalties. This comprehensive article provides a complete guide, breaking down the entire composition scheme GST filing process into easy, actionable steps for your business.
What is the GST Composition Scheme and Who is it For?
The GST Composition Scheme is a simplified tax payment mechanism designed to reduce the compliance load on small businesses. Instead of paying tax at the standard rates and managing detailed invoices, eligible businesses can pay tax at a fixed, lower rate based on their turnover. The core purpose of this scheme is to offer simplicity and predictability in tax matters. The benefits are significant: a much lower, predetermined tax rate means less financial uncertainty, and the reduced paperwork frees up valuable time and resources that small business owners can reinvest into growing their operations. This GST returns filing guide India begins with understanding if this scheme is the right fit for you, as its simplified nature is a major draw for small-scale entrepreneurs across the country.
Eligibility Criteria for the GST Composition Scheme
To avail the benefits of the Composition Scheme, your business must meet specific eligibility criteria, primarily based on its annual aggregate turnover.
- Turnover Limit for Goods: Businesses primarily dealing in goods, such as manufacturers and traders, are eligible if their annual aggregate turnover is up to ₹1.5 crore. For certain special category states (like those in the North-East), this limit is ₹75 lakh.
- Turnover Limit for Services: Service providers and businesses supplying a mix of goods and services can opt for the scheme if their annual turnover is up to ₹50 lakh.
- Eligible Businesses: The scheme is generally open to manufacturers, traders, and restaurant services (that do not serve alcohol).
However, not all businesses can opt-in. The following are ineligible for the Composition Scheme:
- Businesses engaged in making inter-state outward supplies of goods.
- E-commerce operators who collect tax at source.
- Manufacturers of specific notified goods like ice cream, pan masala, and tobacco products.
Key Benefits and Limitations
While the scheme is attractive, it’s crucial to understand both its advantages and its constraints before making a decision.
| Benefits | Limitations |
|---|---|
| Lower Tax Liability at a fixed rate. | Cannot claim Input Tax Credit (ITC) on purchases. |
| Reduced Compliance with fewer returns to file. | Cannot issue a tax invoice, hence the buyer cannot claim ITC. |
| Simple Quarterly Payments instead of monthly. | Cannot make inter-state sales (restricted to sales within the same state). |
| Less Paperwork and simpler record-keeping. | Cannot collect tax from customers; the tax must be paid out of pocket. |
The Complete GST Filing Process for Composition Dealers
One of the most significant advantages of the Composition Scheme is the simplified return filing procedure. Unlike regular taxpayers who file monthly or quarterly returns like GSTR-1 and GSTR-3B, composition dealers have a much lighter compliance load. The entire GST filing process for composition dealers revolves around just two key forms. Taxpayers must make a quarterly payment of tax through a simple statement, Form GST CMP-08, and then file one consolidated annual return, Form GSTR-4. This structure ensures that business owners can focus on their operations without getting bogged down by frequent and complex tax filings. Understanding how to file GST returns India under this scheme is straightforward once you are familiar with these two forms.
Step-by-Step Guide to File Form GST CMP-08 (Quarterly Statement)
Form GST CMP-08 is a statement-cum-challan used to declare the summary of your turnover for a quarter and pay the corresponding tax liability. This form must be filed for every quarter by the 18th of the month following the end of that quarter. Even if you have no sales (a nil return), filing is mandatory. Here is a detailed guide to file GST returns composition scheme using Form CMP-08.
- Step 1: Login to the GST Portal
Begin by visiting the official GST portal at https://www.gst.gov.in/. Use your valid username and password to log in to your account. - Step 2: Navigate to the Returns Dashboard
Once logged in, go to the main dashboard. Follow this path: Services > Returns > Returns Dashboard. - Step 3: Select the Filing Period
On the ‘File Returns’ page, you will be prompted to select the relevant ‘Financial Year’ and the ‘Return Filing Period’ (the specific quarter, e.g., April-June) from the dropdown menus. Click ‘Search’. - Step 4: Prepare the Statement Online
You will see various return forms for the selected period. Find the tile for Form GST CMP-08 and click on the ‘PREPARE ONLINE’ button. - Step 5: Fill in the Details
The CMP-08 form has a simple table where you need to provide a summary of your sales and purchases.
* Table 3: Enter the total value of your outward supplies (sales) for the quarter. The system will auto-calculate the applicable tax (CGST, SGST/UTGST, IGST) based on your declared turnover and composition rate.
* You also need to declare any inward supplies attracting reverse charge, both from registered and unregistered suppliers, and the tax payable on them.
* Enter any interest payable due to delayed payment, if applicable. - Step 6: Save and Proceed to File
After carefully entering all the figures, click the ‘SAVE’ button to store the details. You can review the information by clicking ‘PREVIEW DRAFT GST CMP-08 (PDF)’. - Step 7: Pay the Tax and File
Once you are satisfied with the details, scroll down to the payment section. The total tax liability will be displayed. You can use cash available in your Electronic Cash Ledger to pay the tax. If the balance is insufficient, you must first create a challan by clicking ‘CREATE CHALLAN’ and make the payment. After the payment is successful, you can proceed to file the statement by checking the declaration box and submitting it using either a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).
How to File the Annual Return in Form GSTR-4
In addition to the quarterly statement, every composition dealer must file GST returns annually using Form GSTR-4. This return consolidates the information you have already provided in your quarterly Form GST CMP-08 filings throughout the financial year. It serves as a final summary of your outward supplies, inward supplies, and taxes paid. The due date for filing Form GSTR-4 is 30th April of the year following the financial year. For example, for the financial year 2023-24, the due date would be April 30, 2024. Most of the data in GSTR-4 is auto-populated from your filed CMP-08 statements, which simplifies the composition scheme GST filing process significantly. You just need to verify the auto-populated details, provide purchase-related information, and file the return.
Important Due Dates and Penalties to Avoid
Timely compliance is crucial to avoid financial penalties and legal complications. For composition dealers, the deadlines are straightforward and easy to remember. Missing these dates can lead to late fees and interest charges, which can add an unnecessary financial burden to your small business. Learning How to Manage Late Filing Fees and Penalties for GST Returns is a key part of maintaining good standing with the tax authorities.
Due Dates for GST Return Filing (Composition Scheme)
Mark these dates on your calendar to ensure you never miss a deadline:
- Form GST CMP-08 (Quarterly Statement): To be filed by the 18th of the month following the end of each quarter.
- April to June: July 18
- July to September: October 18
- October to December: January 18
- January to March: April 18
- Form GSTR-4 (Annual Return): To be filed by 30th April of the next financial year.
Late Fees and Interest on Delayed Filing
The consequences for missing the filing deadlines are clearly defined under GST law.
- Late Fee for Returns: If you fail to file Form GSTR-4 by the due date, a late fee of ₹50 per day of delay is applicable (₹25 for CGST and ₹25 for SGST). The maximum late fee is capped based on your turnover. For a nil return, the late fee is ₹20 per day (₹10 CGST and ₹10 SGST).
- Interest on Late Payment of Tax: If you delay the payment of your tax liability (filed via Form CMP-08), you will be liable to pay interest at the rate of 18% per annum for the period of delay.
Conclusion
The GST Composition Scheme is an excellent facility for small businesses, offering a simplified path to tax compliance. To make the most of it, it’s essential to understand and follow the correct procedure to file GST returns. The process can be summarized into two main activities: making quarterly tax payments by filing Form CMP-08 and submitting a consolidated annual return in Form GSTR-4. By adhering to the due dates and filing correctly, you can avoid unnecessary penalties, maintain a clean compliance record, and dedicate your full attention to growing your business.
The GST filing process for composition dealers is designed to be simple, but errors can still happen. Being aware of the Common Mistakes in GST Return Filing and How to Avoid Them can help ensure your filings are accurate and on time. If you need expert help to ensure your filings are accurate and on time, contact the specialists at TaxRobo GST Service today! Let us handle your compliance while you run your business with peace of mind.
Frequently Asked Questions (FAQs)
1. Can a composition dealer collect GST from customers?
No. A key condition of the Composition Scheme is that the dealer cannot collect tax from their customers. The tax liability must be paid by the dealer out of their own pocket. Consequently, they must issue a “Bill of Supply” for their sales, not a tax invoice.
2. What happens if I have no sales in a quarter? Do I still need to file GST returns?
Yes, absolutely. Even if you have zero sales or turnover in a given quarter, it is mandatory to file GST returns. You must submit a Nil Form GST CMP-08 for that period by the due date. Failure to do so will attract late filing penalties.
3. Can I switch back to the regular GST scheme from the Composition Scheme?
Yes, a taxpayer has the flexibility to switch from the Composition Scheme to the regular GST scheme. You can opt out at any time during the financial year by filing Form GST CMP-04 on the GST portal. Once you switch, you will have to follow the compliance requirements of a regular taxpayer, including filing monthly/quarterly returns and issuing tax invoices.
4. What is the main difference between Form CMP-08 and GSTR-4?
Form GST CMP-08 is a quarterly statement used for the primary purpose of declaring your summary turnover and paying your tax liability for that quarter. In contrast, Form GSTR-4 is an annual return that provides a consolidated summary of your turnover, purchases, and tax paid for the entire financial year. It essentially compiles the data from the four CMP-08 statements filed during the year.
