GST Composition Scheme Turnover Limit: A Comprehensive Guide

GST Composition Scheme Turnover Limit: The maximum turnover for a company that wants to be part of the GST composition scheme is INR 1.5 crore. This amount of income indicates which businesses can choose the Composition Scheme to simplify their taxes and reduce rates.

GST Composition Scheme Turnover Limits Overview

This table explains, in brief, what are the turnover limits under the composition scheme of GST applicable for different types of businesses. These limits are set based on business category, region i.e; general states and North-Eastern states, service providers’ limit, manufacturers’ limit and traders’ limit in India. Such an overview should help companies know whether they qualify to pay tax as per the composition rule keeping in view their sales volume and place of business.

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

The following are the key points about the turnover limit for the Composition Scheme:

1. Total Revenue: The revenue ceiling is determined by looking at all sales made. These include any goods or services which have been sold on a taxable basis, as well as those that are exempt from tax or have been exported outside of India, and so forth. However, it does not incorporate inward supplies which attract reverse charge mechanism neither taxes levied nor collected.
2. ₹1.5 Crore Ceiling: Businesses can choose to enter into the Composition Scheme if they had an aggregate turnover of up to ₹1.5 crore in the last financial year. This is meant to benefit small enterprises and ease their compliance requirements.
3. Northeastern States Threshold: In Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura; as well as Himachal Pradesh and Uttarakhand; ₹75 lakhs is the amount that should not be exceeded before one qualifies for composition scheme under GST laws applicable there.
4. Excluded categories: There are some businesses which cannot take part in this scheme regardless of whether or not they meet its monetary limits. Interstate suppliers; manufacturers who make supplies through e-commerce platforms; notified goods sellers; service providers except those falling under specific sectors; casual taxpayers and non-resident taxpayers fall within these categories.

However much it might change from time to time depending on what has been put across by GST authorities concerning turnover thresholds among other things associated with this plan – companies need to follow up such trends regularly but also critically assess themselves based on eligibility taking into account input credits received vis-a-vis compliance requirements coupled with tax implications before going for composition schemes

Composition Scheme Tax Rates under GST

GST Composition Scheme Turnover Limit After Budget 2024

• In the budget of 2024, the GST Composition Scheme Turnover Limit has not been changed and it is the same as last year. The limit is set at ₹1.5 crore in terms of turnover which means that a business with an annual income up to this level can choose to be a part of the composition scheme.
• However, there exists another threshold amount for turnover under this scheme but only for those firms which operate in any state situated in north east region or in himachal pradesh/ uttarakhand. In such cases where people belong to these areas, then their turnover should not exceed ₹75 lakhs if they want to take benefit from gst composition scheme.
• The income tax rules of the agriculture sector have been modified while keeping most of the GST rules unchanged to ensure better management and fair compliance of taxes.

Components Included in GST Composition Scheme Turnover Limit Calculation

GST Composition Scheme Turnover Limit refers to the maximum total annual revenue that a business can make so that it becomes eligible for the Goods and Services Tax (GST) composition scheme in India. The following are among the turnover limit components:

1. Taxable Supplies: These are goods or services sold within intra-state or inter-state which attract GST.
2. Exempt Supplies: Though they do not fall under the tax bracket, their value is still considered while computing for turnover of composition scheme. Some examples include essential commodities, healthcare services and educational institutions.
3. Exports and Imports: While determining this cap, what should be taken into account is; either zero-rated supplies made abroad by an enterprise or importations subject to IGST (Integrated GST).
4. Inter-State Transactions: Any business doing transactions between states should also add up such revenues when calculating its limits.
5. Taxable Services: If there exist any taxable service being offered by a firm then income earned from it must form part of the computation towards setting limitations for such establishments.
6. Non-Taxable Income: All other incomes which cannot be taxed like rental earnings, interest etc., need not escape inclusion within thresholds set hereinabove.

However, please note that some items are excluded from considering them as part of turnover for composition scheme calculation as per GST laws viz. taxes levied under GST itself, inward supplies attracting reverse charge mechanism & advances received without issuance of invoices etc., so that accurate assessment may be done regarding eligibility based on turnover under composition scheme.

GST Composition Scheme Income Exclusions

The GST composition scheme income exclusions are specific things or kinds of revenue that do not count towards a business’s qualification into the Composition Scheme under Goods and Service Tax (GST) in India. Companies must know what these exclusions are so they can properly determine their eligibility and follow all necessary laws related to GST. Following is an enumeration of some common examples:

1. Taxes and Duties: When calculating turnover limits, one should ignore taxes, duties, cesses or levies imposed by the Government under this regime; otherwise it would be unfair for them also have collected and remitted such amounts on its behalf.
2. Inward Supplies Under Reverse Charge: Another example may include any income generated from inward supplies attracting reverse charge mechanism instead of supplier incurring liability towards paying sales tax on goods supplied or services rendered but buyer becoming liable therefor as recipient thereof according to law applicable at time when transaction occurred between parties concerned .
3. Advances without Invoices: Advances received where no invoice has been issued should not be considered while determining the threshold limit for computation of turnover. This is done to avoid overestimation due to duplication revenue earned and ensure only actual taxable supply made by business are taken into account.
4. Non-Taxable Income: Any gains which are exempted from being taxed under this system like dividends , interest earned etc will also form part of incomes excluded from calculation because they fall outside purview attracting levy on sales made or provision services rendered so far .
5. Exports And Supplies To SEZs: Generally speaking exportation goods abroad as well supply special economic zones treated zero rated basis hence usually left out during working out total receipts subject to levy under GST.
6. Goods Used For Personal Consumption : Where items purchased solely used personal consumption non-business purposes only then their cost does not contribute towards aggregate amount subject to chargeable event tax .

Composition Scheme Under GST – Updated 2024

GST Composition Scheme Turnover Limit for Services

The turnover limit for service providers to avail the GST Composition Scheme are as follows :

• Newly Registered Businesses: If you have newly registered as a service provider, your turnover should not exceed Rs. 50 lakh in the current financial year to be eligible under this scheme.
• Previously Registered Businesses: In case of those service providers who were already registered under GST system – their turnover must not have crossed Rs 50 lakhs during preceding financial years (i.e., previous year) so that they can opt for the composition scheme in current financial year.

It may be noted that these figures are liable to change with time and according to notifications issued by GST authorities. Therefore, one should refer updated guidelines on official portal of GST or take advice from tax consultants so that he/she can comply with requirements of composition scheme for service sector.

GST Composition Scheme Turnover Limit for Manufacturers

The GST Composition Scheme sets turnover limits for manufacturers as follows:

1. Aggregate Turnover Limit (General States): If their total revenue does not exceed INR 1.5 crores during the last financial year, manufacturers may choose to go for this scheme.
2. 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 & Tripura), Himachal Pradesh and Uttarakhand; an entity should have a turnover of less than or equal to INR 75 lakhs in order to qualify under composition scheme.

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

The following timeline shows variations in the limits of turnover under the GST Composition Scheme:

Before GST:

In this period, there were numerous turnover-based schemes like VAT and Service Tax but not Composition Scheme as it exists today.

GST Rollout (July 1, 2017):

• Initially, composition scheme limit was ₹75 lakhs for all states/UTs except special category states where it was ₹50 lakhs.
• Manufacturers, traders and restaurant service providers could opt for composition scheme.

November 15, 2017:

Turnover threshold limit of composition scheme was increased to ₹1 crore for all states/UTs except special category states where it was increased to ₹75 lakhs.

July 1, 2019:

Composition scheme limit enhanced to ₹1.5 crore for all states/UTs.

2020-2022:

During these years, there were no significant changes in terms of turnover limits under Composition Scheme. The limit continued to be ₹1.5 crore for general states and ₹75 lakhs for special category states.

Post-Budget 2023 (Notification No.28/2023 – Central Tax dated 31.07.2023):

• Composition scheme has been extended to suppliers of goods through e-commerce model but service providers via ecommerce still have some restrictions.
• E-commerce operators dealing with supply of goods by tax paying Composition Dealers have been provided specific procedures thereof.

Post-Budget 2024:

• As per latest update there are no major changes made in the turnover limits prescribed for availing composition scheme.
• However, businesses should keep themselves updated with official notifications or announcements regarding any change or amendment brought out by GST authorities in this respect.

GST Composition Scheme changes for E-commerce Operators

Extension of Composition Scheme to Suppliers of Goods through E-commerce:

Earlier, registered persons who supplied goods through an e-commerce operator (ECO) were not entitled to use the Composition Scheme. However, this has changed with the introduction of section 137 in Finance Act 2023.

Please note that this extension is only applicable on supplies made by suppliers supplying goods i.e., supply of services though ECOs shall continue not to be eligible for composition scheme benefits.

Special Procedures related to E-commerce Operators:

Notification Nos.36/2023 – Central Tax have been issued by The Central Board of Indirect Taxes and Customs (CBIC), which prescribes certain special procedures that are required to be followed by every e-commerce operator while dealing with supply of goods by those individuals who are tax paying composition dealers under Section 10 of CGST Act’2013.

These include:

1. Inter-state supply prohibition: A person being a tax paying composition dealer shall not make any inter-state supplies through e-Commerce platforms.

2. Enrolment number mandate: An e-Commerce operator should allow supply of goods only when an enrolment number has been allotted to the supplier being a tax paying composition dealer on common portal; otherwise such supplies will not be allowed.

3. Tax collection at source: For all supplies made by supplier being a tax paying composition dealer through its platform, an e-Commerce operator need to collect tax at source as per Section 52(1) CGST Act.

The objective behind these measures is to simplify taxes and ensure compliance among goods providers using E commerce while extending benefit under composition scheme where eligible.