Home > GST > Help Center > GSTR 4 ExplainedLast Updated: Dec 28th 2023
GSTR 4 Explained
Explaining GSTR-4 (GST Return form for Composition business entities) Return, GST Rates, advantages and dis-advantages along with FAQs
Composition Scheme is alternative method of GST which is designed for small taxpayers. The objective of Composition scheme is to bring simplicity and reduce the compliance cost for small taxpayers
Initially the composition scheme was designed for manufactures, traders and restaurants. Later the service providers are also included this scheme.
Key Components of GSTR 4 Return
1. Turnover Limits
The composition scheme is applicable for both supply of goods and service providers. The turnover limits are as follows
- For Supplier of Goods/Restaurants: The aggregate turnover of a supplier of goods or restaurants in preceding financial year should be as follows
- In Special Category States – up to Rs 75 Lakhs
- Other states – Up to Rs 1.5 Crores
- For Supplier of Services: The aggregate turnover of a supplier of services in preceding financial year should be up to Rs 50 Lakhs
2. Tax Invoice
- The Composition taxpayer cannot issue a tax invoice, because the tax has to be paid by the dealer out of pocket.
- Bill of Supply should be issued instead of tax invoice
- A Composition Dealer is not allowed to recover the GST from the customers.
3. GST Rates
| Business Categories | CGST | SGST/UTGST | Tax Rate |
|---|---|---|---|
| Manufacture | 0.5% | 0.5% | 1% |
| Traders (G & S ) | 0.5% | 0.5% | 1% |
| Supplier of Food or Drinks for human consumption (Without Alcohol ) | 2.5% | 2.5% | 5% |
| For Services | 3% | 3% | 6% |
4. Additional Information
- They cannot claim the Input Tax Credit on any purchases
- Composition Scheme is available only for dealers doing intra-state supplies (within state).
- They no need to be maintained the books of accounts for GSTR.
- The taxpayer registered under composition scheme should mention the words “composite taxable person “at his place of business
The Composition Scheme is the very helpful to every small business, because they cannot maintained the everyday transactions ( books of accounts ). Compare to regular GST scheme, the Composition taxpayers required file the totally 5 GSTR ( i.e. Four Quarterly GSTR’s in the form of GSTR-4 & mainly one annual GSTR in a year in the form of GSTR-9A.)
Advantages of Composition Scheme :
- Lower Tax Payment ( Like 1%,5%,6% etc…)
- Less Compliance Involved in the Composition Scheme.
- Less Tax & High Liquidity
- Very simple quarterly returns and Annual Return (4 quarterly returns in CMP 08 and 1 Annual Return in GSTR 4)
Dis-Advantages of Composition Scheme :
- Non-Availability of Input Tax Credit.
- Cannot collect the Tax payment from customers.
- Few Taxpayers are preferred the Composition Scheme..
- Inter-State sales are not permitted.
Due Date for Composition Scheme :
- Quarterly returns in CMP 08: Composition dealers are required to file a quarterly GST return using form CMP-08 by the 18th of the month following the quarter for which the return is being filed. The due dates for filing CMP 08 are as follows
- Annual Return in GSTR 4: The due date for filing Annual return in GSTR 4 for taxpayers registered under composition scheme is April 30 every year
| Quarterly Period | Due Dates |
|---|---|
| April to June | 18th July |
| July to Sep | 18th October |
| Oct to Dec | 18th January |
| Jan to March | 18th April |
Penalty for belated filing for CMP 08 and GSTR 4 :
In addition, the GST Council reduced the fees for filing GSTR-4 returns after their Due Dates to :
- CMP 08: There is no penalty for late filing of CMP 08 but Interest on delayed tax payments is charged at 18 % per annum on the amount of outstanding tax and is calculated from the day following the missed due date until the actual date of payment
- GSTR 4: Rs 50 per day is charged as late fee for delay in filing GSTR 4. Penalty will be capped @ Rs 500 in case of nil tax liability and Rs 2000 in case of tax liability
5. Quick GSTR 4 FAQ's
A Taxpayer supplying goods and res whose turnover is upto Rs 1.5 crore can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75 lakh.
No, a Composition Dealer is not allowed to avail input tax credit of GST on purchases.
Before the beginning of every financial year, a registered taxpayer is required to provide a declaration on the GST Portal. This cannot be done anytime during the year. Generally the due date is March 31 2022.
The Composition taxpayers required file the totally 5 GSTR ( i.e. Four Quarterly GSTR’s in the form of CMP 08 & mainly one annual GSTR in a year in the form of GSTR-4).
The Composition taxpayers required file the CMP-08 (Quarterly ) by next month 18th. Also, GSTR-4 has to be filed by 30th April of Next financial year.
A Taxpayer can change GST regular scheme to Composition Scheme once in a financial year.
In this situation, the taxpayer should withdraw from the composition scheme by filing the GSTR-4 within 7 days from the day on which the turnover exceeded. They will be liable to pay tax under the normal tax scheme starting the following day .
The GST Council reduced the fees for filing GSTR-4 returns after their due dates to:
- Rs. 50 per day of delay in normal cases.
- Rs. 20 per day of delay for taxpayers having nil tax liability for the month.
- Interest on delayed tax payments is charged at 18 % per annum on the amount of outstanding tax and is calculated from the day following the missed due date until the actual date of payment.
- Supplier of services other than restaurant related services.
- Manufacturer of ice cream, pan masala, or tobacco.
- A Non-resident taxable person or Casual taxable person.
- Taxpayer supplying exempt supplies.
- Businesses which supply goods through an e-commerce operator.
Want to get support to file GSTR-4 for your business ? Get to know more @ GSTR-4 Filing Price