Verify GST Composition Scheme Status

You can check whether a supplier is a composition dealer before you rely on their invoice or ITC. This guide explains how to verify GST composition scheme status.

Identifying whether a seller operates under the Goods and Services Tax (GST) composition scheme is essential for consumers. This verification protects buyers from being wrongly charged GST on their purchases.

Understanding Composition Taxpayers

A composition taxpayer is a business entity subject to specific conditions and limitations under the GST law. Initially, only goods dealers and suppliers could opt for this scheme, governed by Section 10 of the CGST Act. The turnover threshold for goods suppliers to be eligible is INR 1.5 crore annually.From April 1, 2019, service providers gained a similar option with an annual turnover limit of INR 50 lakh. Manufacturers and traders under this scheme pay 1% GST (0.5% CGST and 0.5% SGST). Restaurants, excluding those serving alcohol, remit 5% GST (2.5% CGST and 2.5% SGST). Service providers participating in the scheme pay 6% GST (3% CGST and 3% SGST).

Conditions for Composition Taxpayers

Businesses under the composition scheme must adhere to several conditions:

• Businesses under the composition scheme are not allowed to claim Input Tax Credit (ITC).
• They cannot deal in goods exempt from GST, such as alcoholic beverages. Manufacturers of specific items like ice cream, pan masala, or tobacco are also ineligible.
• Composition taxpayers are restricted from making inter-state supplies of goods or services. They also cannot supply goods through e-commerce operators that are required to collect Tax Collected at Source (TCS).
• For transactions under the Reverse Charge Mechanism (RCM), these taxpayers must pay GST at standard rates.
• If a taxpayer has multiple business segments (e.g., textiles, electronics, groceries) operating under the same Permanent Account Number (PAN), all units must collectively register or opt out of the scheme.
• Instead of a tax invoice, composition taxpayers must issue a bill of supply that does not include GST charges.
• They are required to prominently display ‘composition taxable person’ on all notices and signboards at their business premises.
• Every bill of supply issued by them must clearly state ‘composition taxable person’.
• As of February 1, 2019, manufacturers or traders can provide services up to a limit of 10% of their annual turnover or INR 5 lakh, whichever amount is higher.

Importance of Identifying Composition Taxpayers

For consumers, verifying whether GST should be applied to their purchases is crucial. While invoices typically provide this information, some suppliers may illegally levy additional charges as GST without authorization. To prevent such discrepancies, GST regulations mandate that registered taxpayers exhibit their GSTIN and registration certificate at all registered business locations.

Composition taxpayers have specific obligations; they must explicitly state their registration under the composition levy on both their bills of supply and prominently displayed signboards. This means customers are not required to pay GST on goods or services purchased from these taxpayers.

Methods to Determine if a Seller is a Composition Taxpayer

Composition scheme participants are prohibited from charging GST to their customers. There are three straightforward methods to determine if a seller falls under this scheme. First, observe if the phrase ‘composition taxable person’ is visible on any notices or signboards at their primary or secondary business locations. Second, inspect the bill issued; it should explicitly state ‘composition taxable person, not eligible to collect tax on supplies’ at the top. Third, the GST portal provides a verification tool, details for which will be discussed later.

About Search Composition Taxpayer Tools

A utility designed to search for composition taxpayers allows users to confirm if a specific GSTIN is currently registered under the composition scheme. This tool also enables the retrieval of a list of registered composition scheme taxpayers by entering a full or partial legal name. This functionality is freely accessible to anyone possessing either the GSTIN or the legal name.

Benefits of Online Composition Taxpayer Search Tools

The advantages of employing an online tool to search for composition taxpayers include:

• It helps confirm the authenticity of any GSTIN.
• The tool allows users to ascertain if a particular GSTIN belongs to a composition taxpayer.
• Consumers can determine whether they are liable to pay GST to a specific vendor.
• Unclear GSTINs on handwritten invoices can be easily verified.
• Businesses can prevent engagement with suppliers utilizing fraudulent GSTINs.
• It aids in preventing GSTIN-related fraud.
• Vendors can also use it to rectify potential inaccuracies in their GSTIN reporting.

Frequently Asked Questions

Why verify composition status?

A composition dealer cannot charge GST or pass on input tax credit, so if you are a buyer, knowing their status tells you not to expect ITC from their bill of supply.

How do I check a GSTIN’s composition status?

Use the Search Taxpayer tool on gst.gov.in — enter the GSTIN and it shows the taxpayer type, including whether they are under the composition scheme.

Can I confirm my own composition status?

Yes. Log in to the portal; your dashboard and registration details show your taxpayer type and scheme, and any opt-in or opt-out history.

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