The composition scheme was introduced to bring simplicity and reduce the burden and compliance cost for small businesses. Registering for this scheme is optional where the taxpayers pay tax at a prescribed percentage of their turnover. To be eligible to register in this scheme, certain conditions have to be fulfilled.
GSTR-4 is a mandatory return that all taxpayers who have opted for the composition scheme need to file. It is an annual return summarizing the inward, outward supplies, import of services, inward supplies attracting reverse charge, tax payable, tax paid, etc. composition taxpayers also have to file CMP-08 which also acts as a challan through which they must pay tax every quarter within the due date.
There are late fees and penalties for non-compliance. Let us discuss in detail about the composition scheme, GSTR-4 annual return filing and late fees and penalties for non-compliance.
Eligibility to Register for Composition Scheme
- Suppliers of goods being manufacturers, retailers with an aggregate turnover up to Rs.1.5 crores (Rs.75 lakhs for businesses in the north eastern states) in the previous financial year.
- Aggregate turnover is calculated by taking all the businesses registered under the same PAN.
- Suppliers of services with an aggregate turnover of up to Rs.50 lakhs in the previous financial year.
- Businesses with an intra-state supply of goods.
- All the notice boards at the business address and all bills of supply should mention ‘composite taxable person’.
- Composite taxable businesses are not allowed to claim input tax credit or collect composition tax.
Who are Not Eligible for Composite Scheme
- Casual taxable and Non-Resident persons.
- Suppliers whose aggregate turnover crossed Rs.1.5 crores in the preceding financial year.
- Suppliers who have purchased goods and services from unregistered suppliers.
- Service providers and suppliers other than those related to restaurant business.
- Businesses supplying goods using an e-commerce operator, tobacco and pan masala manufacturers, and ice cream manufacturers.
- Suppliers of GST exempted goods.
- Suppliers of inter-state goods and non-taxable goods.
Who has to File GSTR-4
All taxpayers who opt for the composition scheme under GST during the financial year must file GSTR-4. This includes:
- Taxpayers who have opted for the composition scheme since registration and have never opted out subsequently.
- Taxpayers opting for the composition scheme before the starting of the financial year.
- Taxpayers who have opted for the composition scheme but subsequently opted out any time during the year.
GSTR-4 and CMP-08
Taxpayers who have registered for the composition scheme in the GST regime during the financial year or were in composition scheme for any period during the said financial year are require to file the annual GSTR-4 return. It is a summarized return containing details of inward and outward supplies, import of services and supplies attracting reverse charge, tax payable, tax paid etc.
CMP-08 is a summary statement consisting of a summary of outward supplies and inward supplies attracting a reverse charge and import of services, tax payable, interest payable, and tax and interest paid. It is used to declare the self-assessed tax which is payable for a given quarter by taxpayers registered and opted for the composition scheme. It also acts as a challan to make payment of the tax.
Due Dates for filing GSTR-4 and CMP-08
The due date for filing GSTR-4 return is 30th of the month following the financial year. CMP-08 is a quarterly return and the due date for submission of this return is 18th of the month succeeding the quarter. That is for the quarter April to June, due date is 18th July, July to September is 18th October, and January to March is 18th April. The GST CMP-08 has to be filed annually. The return once filed cannot be revised. Changes can be done in the annual return in form GSTR-4. Tax liabilities are paid by electronic cash ledger only. The quarterly payment form has to be submitted every quarter even if there is no tax liability in any of the quarters. The yearly return GSTR-4 can only be filed when the CMP-08 of all the four quarters are filed.
Penalty for Non-Filing of CMP-08
A penalty of Rs.200/- per day for every day of delay is applicable for non-filing of CMP-08, subject to a maximum of Rs.5000/-. Moreover, GSTR-4 cannot be filed for that year unless CMP-08 of all quarters of that financial year have been filed. If CMP-08 of two consecutive quarters are not filed, the e-way bill generation is blocked. For unblocking, the taxpayers have to apply to the jurisdictional officer in form GST EWB05 and subsequently file all pending forms of the previous quarter.
Late Fees for Late Filing of GSTR-04
If the composition dealer fails to file GSTR-08 within the due date, he is liable to pay a late fee of Rs.50/-per day subject to a maximum of Rs.2000/-and Rs.20/- per day for nil returns with a maximum of Rs.500/-.
In addition to late fee, a penalty of 10% of the tax amount subject to a minimum of Rs.1000/- may also be imposed for delay in filing or for non-filing of GSTR-4. It may also result in cancellation of registration if the returns are not filed for three consecutive tax periods. If the turnover of the business crosses Rs.1.5 crores, the taxpayer has to switch to regular scheme and file regular returns. If he continues to pay tax in the composition scheme, he is liable to penalty and provisions of section 73 or 74 shall be applicable for the determination of tax and penalty.
Frequently Asked Questions
- Can a taxpayer file GSTR-4 without paying late fee?
Answer: No, taxpayers cannot file GSTR-4 without paying late fee, if it is filed after the specified date.
- How can a taxpayer discharge is tax, interest and late fee liabilities?
Answer: Tax and late fee are auto-populated and interest is calculated and entered manually in table-8 and the liabilities can be discharged through electronic cash ledger only.
Related Read: Eligibility Criteria for Filing GSTR-4
It is important for composition taxpayers to know the process of filing GSTR-4 and CMP-08 returns within the due date to avoid late fees and other penalties. It is important for taxpayers to maintain proper records of their transactions throughout the year to file the mandatory returns accurately and on time and avoid legal and financial complications due to non-compliance. The rules and regulations can be complicated and confusing, at such times the use of technology and the advice of professionals will help to a great extent.