The Validity of Composition Scheme in GST is a common concern for small taxpayers who opt for this simplified tax structure. The scheme was introduced to reduce compliance burden and make GST easier for small businesses. However, the validity of the scheme depends on several conditions and limits set by the GST law.
Understanding the Validity of Composition Scheme in GST
The validity of the Composition Scheme in GST is not indefinite. It continues only as long as the registered taxpayer satisfies the eligibility conditions. The moment those conditions are breached, the taxpayer must switch to the regular GST scheme.
Conditions for Validity of Composition Scheme in GST
To maintain the validity of Composition Scheme in GST, businesses must comply with the following:
-
Turnover Limit: The aggregate turnover in the preceding financial year should not exceed ₹1.5 crore (₹75 lakhs for some states).
-
Nature of Supply: Businesses cannot engage in inter-state outward supplies or supply through e-commerce operators.
-
Tax Collection: Composition dealers cannot collect GST from customers.
-
Input Tax Credit: They cannot claim ITC on purchases.
If any of these rules are violated, the Composition Scheme in GST ends immediately.
Situations Where the Validity Ends
| Situation | Impact on Validity |
|---|---|
| Turnover crosses ₹1.5 crore | Must shift to regular GST |
| Dealer starts inter-state sales | Scheme becomes invalid |
| Engaging in restricted business | Immediate exit required |
| Voluntary withdrawal | Validity ends from chosen date |
How to Continue the Composition Scheme in GST
To ensure ongoing validity, taxpayers should:
-
Monitor turnover closely.
-
File all GST returns on time.
-
Avoid making ineligible supplies.
-
Inform GST authorities immediately if conditions change.
By doing so, small businesses can keep enjoying the benefits of the scheme.
Conclusion
The Validity of Composition Scheme in GST depends entirely on compliance. Once the eligibility criteria are broken, the dealer must migrate to the normal GST scheme. Therefore, small businesses should track their transactions and turnover carefully.
👉 Need help with GST Composition Scheme compliance? Contact us today for expert guidance.