GST Form CMP-02: Opt for Composition Scheme Easily

Indian small business owners have probably encountered the GST Composition Scheme in their operations. Small businesses can use this GST scheme to pay taxes in fixed amounts instead of applying payments to taxation on each deal. A business requires filing the GST CMP-02 Form to receive the benefits of this scheme. You can stop worrying since this process remains unfamiliar to you. The following blog describes everything about GST Form CMP-02.

What is GST Form CMP-02?

Since businesses need to notify the government about their GST Composition Scheme participation on the GST CMP-02 Form, they have to file this declaration. The government established this scheme for bringing simplified tax systems to small businesses while lowering their tax compliance requirements.

Companies using this scheme must pay tax as a portion of their entire revenue total rather than applying taxation to each individual invoice. The tax system of the composition scheme proves advantageous to business owners, shopkeepers, and service providers who seek an easy-to-understand taxation structure.

Who Can Opt for the Composition Scheme?

The eligibility requirement for the composition scheme must be evaluated before processing GST Form CMP-02.

• Turnover Limit

A business that reaches an annual turnover under ₹1.5 crore remains eligible to apply. The turnover limit for Composition Scheme eligibility reaches ₹75 lakh among businesses established in special category states like those located in the North-Eastern regions.

• Type of Business

The scheme allows applications by manufacturers combined with traders and some service-making businesses. The tax composition scheme does not work for companies operating in alcohol, tobacco, and interstate sales.

• No Input Tax Credit (ITC)

When you choose this scheme, your business will lose the ability to claim input tax credit (ITC) from your purchases. Your raw material purchases through GST will not generate a refund because you need to forfeit your right to receive input tax credit.

• No E-commerce Sales

The online marketplace schemes of Amazon and Flipkart do not support businesses utilizing this scheme as eligibility criteria.

Why Should You Opt for the Composition Scheme?

Small firms pick the composition scheme because it offers them multiple advantages.

• Lower Tax Rates

Organizations that participate in the Composition scheme must pay their taxes under a defined and reduced tax bracket. The tax percentage structures for traders stand at 1%, while restaurant operators must pay 5%.

• Less Paperwork

The composition scheme provides easier tax administration by requiring less document submission than regular GST since it only needs quarterly reports instead of monthly reports.

• Easier Tax Calculation

Businesses do not need to determine GST amounts for each invoice. The formula requires you to determine your percentage of total turnover and then settle this amount.

• Better Cash Flow

Your business operations will benefit from improved working capital because tax rates under this scheme are lower. 

Step-by-Step Guide to Filing GST Form CMP-02

Filing Form CMP-02 is simple. Here’s how you can do it:

Login to the GST Portal

• Users should access the official GST website located at www.gst.gov.in.Proceed with logging in using your GST Identification Number (GSTIN) together with your password.Navigate to the Right Section
• Users need to access the 'Services' tab, then select 'Registration' where they should choose 'Application to Opt for Composition Levy'.

Fill in the Form

• Read the declaration page carefully.
• Check the provided checkbox to indicate your decision for the composition scheme.
• You must enter all required business details on the system before choosing the authorized signatory.

Submit the Form

• Organizations using company and LLP structures must submit their application through a Digital Signature Certificate (DSC).
• Online engagement with the Electronic Verification Code (EVC) service provides submission access to proprietors and partnerships through the mobile number registered with the government.

Receive Confirmation

You will get an acknowledgment through both registered email and mobile number after successful submission of the form. Keep this for your records.

When is the Last Date to File GST Form CMP-02?

• The filing deadline for the form occurs before the beginning of the financial year. To begin the composition scheme in financial year 2025-26, you need to file GST Form CMP-02 before March 31, 2025.
• New GST registrants can file Form CMP-02 directly when establishing their GST registration.

What to Do After Filing CMP-02?

The Composition Scheme application needs a final action step following eligibility approval.

File GST Form ITC-03

• The required filing of this form needs to happen within the initial sixty days.
• The GST CMP-02 form enables taxpayers to reveal their stock status preceding their Composition Scheme entry.
• The form helps reverse previous ITC claims since this tax scheme does not permit input tax credit eligibility.

Things to Keep in Mind

• A move from the Composition Scheme to regular GST becomes impossible during the current tax year once selection occurs.
• All invoices and your business locations must show the description 'Composition Taxable Person'.
• Any business whose turnover reaches above ₹1.5 crore must abandon the Composition Scheme and begin filing regular monthly GST returns.
• GST collection from customers remains illegal under the conditions of the Composition Scheme. Customers do not deduct the tax payment because it goes directly from you to the government.
• Opting for this scheme is unavailable to sellers handling exempt items and services.

Final Thoughts

The GST CMP-02 Form application serves as a simple tool for tax document filing by small businesses. The eligibility requirements can lead you to save time from complex GST computation by switching to the composition scheme. Time adherence to this form submission ensures effective tax compliance that allows you to focus on your business expansion.

The benefits of utilizing the composition scheme will be available to you if you file your GST Form CMP-02 before the deadline expires.This guideline should clarify the steps involved for you. Post any inquiries about this topic by adding them in the comment section.

FAQs

1.How can a taxpayer opt for the Composition Scheme under GST?
A taxpayer must file Form GST CMP-02 online on the GST portal before the financial year begins. New taxpayers can opt for it while registering using Form GST REG-01.

2.Can a taxpayer switch to the Composition Scheme mid-year?
No, existing taxpayers must apply before the financial year starts. The scheme remains valid for the entire year, provided eligibility conditions are met.

3. Is filing a stock intimation mandatory when opting for the Composition Scheme?
Yes, taxpayers must file Form GST ITC-03 within 60 days to declare input tax credit details on stock before switching to the Composition Scheme.
 

Also Read : GST Composition Scheme