GST CMP 02- an Intimation to the Government about opting for GST Composition Scheme

The Composition Dealer cannot issue a tax invoice under the Composition Scheme. That means the taxpayer registered under the Composition Scheme, cannot charge tax from customers. The Composition Dealer needs to issue a Bill of Supply. The main advantage of opting for the composition scheme is that there are fewer compliances as it only requires to file quarterly returns i.e. Form GSTR 4. In this article we have discussed everything about filing of GST CMP 02 (initiation to the Government) for opting benefits of the Compositions Scheme.

What is GST CMP-02 Form under GST?

• When a taxpayer a financial year or during the middle of a financial year wants to get registered for the Composition Scheme under GST, he needs to inform the Government regarding the same by filing GST CMP-02 form.

• It is important to note here that If the GST CMP-02 form for opting in the Composition Scheme, is filed in the middle of the FY, the rules to the scheme would be applicable from the succeeding month of the month in which the form has been filed.

• For example, If a taxpayer files Form CMP 02 in April 2022, the Composition Scheme shall be applicable from May 2022 as per the rule.

• Form CMP-02 can be filed online on the GST Portal / GSTN by the taxpayer.

Eligibility criteria to opt for the GST Composition Scheme?

• Every person who is an eligible registered taxpayer can apply for the GST Composition Scheme and file form GST CMP-02.

• If an average annual domestic PAN-based turnover is less than required from the department, then the taxpayer can opt for composition.

Non-Eligible Taxpayer for the GST Composition Scheme 

The following taxpayers cannot opt for the Composition Scheme under GST

• Taxpayers dealing in certain supply of goods under the act.
• The taxpayers having Inter-state outward supplies of goods.
• Composition Dealer supplying goods via e-commerce operators who are needed to obtain tax under Section 52 of the Act.
• Taxpayers engaged in the manufacturing of goods such as Ice cream and other edible ice, whether containing cocoa or not.
• A taxpayer who is a casual dealer.
• A Non-Resident Foreign Taxpayer.
• A taxpayer who is registered as Input Service Distributor (ISD).
• A Taxpayer registered as TDS Deductor /Tax Collector

Conditions for registering under the Composition Scheme

The following are the conditions that a GST taxpayer needs to fulfill for opting for Composition Scheme:

• A Composition dealer can not claim Input Tax Credit under GST.
• A dealer opting for Composition Scheme can not supply non taxable goods under GST such as alcohol.
• For the transactions under the Reverse Charge Mechanism, the dealer has to pay the taxes at the normal rates, if he opts in for the Composition Scheme under GST.
• If a taxable person must register different segments of businesses registered under the same PAN, under the scheme collectively or opt-out of the scheme. (for e.g. textile, electronic accessories, groceries, etc.)
• On every notice or signboard displayed prominently at their place of business, the taxpayer has to mention the words ‘Composition Taxable Person’ .
• Also, on every bill of supply issued by the taxpayer, he has to mention ‘Composition Taxable person’.
• As per the CGST (Amendment) Act, 2018, an amendment was made on 1st of Feb, 2019 where a manufacturer or trader can supply/ sell services to an extent of 10% of turnover, or Rs.5 lakhs, whichever is higher.

Benefits of opting for GST Composition Scheme

• GST Composition Scheme has easy compliance as there is a need to maintain elaborate accounts and records.

• The taxpayer opting for the Composition Scheme has to file a simple Quarterly Return.

• The Composition Taxpayer needs to make a quarterly payment of tax.

Steps to file GST CMP-02 for Composition Scheme on GST Portal  

Step 1: For filing GST CMP 02 first you need to Login to GST Portal

Step 2: After logging in GST Portal, Go to ‘Services’ > ‘Registration’ > ‘Application to Opt for composition Levy’.

Step 3: There will be a window for Declaration and verification. There you need to tick on the checkbox after reading the ‘Composition Declaration’ and ‘Verification’ carefully. Also, you need to Choose the ‘Name of Authorized Signatory’ from the drop-down. after that, type the ‘Place’ and click on the ‘Save’ button.

Step 4: The taxpayer can submit the application using any of the three methods. However, if it is an LLP or a company can submit the application only using the DSC.

Step 5: Once you submit the application, there will be a warning popup where you need to click the ‘Proceed’ button.

Step 6: Once you submit the application and click on the ‘Proceed’ button on the warning popup, there will be a success message on the screen. Also, an acknowledgment shall be sent to you on the registered email ID.

Please Note: Once you file the form CMP 02 for opting in the Composition Scheme, you will be required to file GST CMP 03 within 90 days.

The GST Compositions Scheme provides a few benefits to the taxpayer. However, with the benefits comes the obligation. The Taxpayer opting for the GST Composition Scheme has to file the form CMP 02 after which GST CMP 03 needs to be filed within 90 days of opting for the scheme. Also, the Composition Dealer is under an obligation to file the tax and submit the statement quarterly in Form GST CMP 08. Also, he needs to file a return for every Financial year in  Form GSTR 4.