What is Composition Return in GST?

Calculating Tax

All composition dealers have the duty to file a Goods and Services Tax (GST) return within a period of time which the government announces beforehand. The GST return is commonly known as GSTR-4. The main difference between a person filing a GSTR-4 and a regular GST return is that the latter who is a normal taxpayer should compulsorily file 3 monthly returns. A composition dealer needs to take care of GSTR-4 alone.

When one looks at GST Latest News, it shows that a few changes have been made to provisions of composition return (GSTR-4) along with updates in the composition scheme.

Who Are Composition Dealers?

Anyone who is part of the composition scheme that is offered under GST can be called as a composition dealer. Only suppliers of goods can be composition dealers. Service providers except restaurant service providers are not entitled to be part of this scheme. In addition to that, not all goods suppliers are eligible to make use of the composition scheme.

Who Can Become A Composition Dealer?

As mentioned in the above paragraph he/she needs to be a good supplier or a restaurant service provider to join the composition scheme. Among this specific category, suppliers whose businesses are responsible for inter-state supply are not eligible. This implies that the businesses should undertake the supply of goods at an intra-state level alone to join the composition scheme.

The annual turnover of the business owner should not be more than Rs. 1.50 Crore as anyone with a higher turnover is ineligible to register for the composition scheme.

Apart from the conditions mentioned above, dealers who make use of any electronic commerce operators to supply their goods are considered ineligible to register under the GST composition scheme.

The composition scheme cannot be opted for one single business alone if the taxable person runs more than one business using the same PAN. He/she cannot choose to pay taxes for one and opt for the composition tax scheme for others.

One important fact the dealers must know is that they cannot ask for composition tax or collect it from the supplies’ recipient. They are not eligible to get Input Tax Credit either.

If a person is ineligible to be part of the composition scheme, his/her liability in terms of taxes would be the amount of tax along with interest and penalty.

How Does A Composition Dealer Benefit Under GST Composition Scheme?

A composition scheme makes it easy and simplifies the whole taxation process for the dealer. In addition to that for a small business owner, the compliance cost will be less if he/she opts for the composition scheme.

There is no compulsion to be part of the scheme as it is fully optional. But if he/she chooses to be part of the scheme, he/she gets the chance to pay the tax amount at an authorized percentage of turnover. This simply implies that he/she need not pay the tax at the normal rate by being part of the composition scheme.

Points To Know About GSTR-4

All taxpayers who have opted for the composition scheme should compulsorily file the GSTR-4. Once it is filed, the revision of GSTR-4 cannot be done by using the GSTN portal. If he/she makes any mistake while filing the GSTR-4 for a quarter, it can be revised only when the time to file the GSTR-4 of the next quarter arrives.

In case the business owner is late to file the GSTR-4, a penalty has to be paid by him/her. Currently, the penalty is Rs. 50 per day. It was reduced from RS.200 per day. If there is a NIL return, the late penalty is just Rs. 20 per day. The penalty cannot go beyond Rs. 5000 as that is the maximum amount that can be charged in terms of penalty fee.

A taxpayer is not allowed to skip a quarter’s GSTR-4. This means that he/she cannot file a quarter’s return without filing the previous quarter’s GSTR-4. In other words, if he/she does not file the GSTR-4 of a specific quarter, he/she cannot file the upcoming quarter’s GSTR-4 either.

The due date of GSTR-4 generally falls in mid-July, mid-October, mid-January, and mid-April for the period April-June, July-September, October-December, and January-March respectively.

For the April-June 2019 period, the due date was 18 July, 2019 while the July-September 2019 has the due date as 18 October, 2019. The October-December 2019and January-March 2020 periods have 18 January, 2020 and 18 April, 2020 as their respective due dates.

What Are The Components Of GSTR-4?

The GSTR-4 comprises of 13 different sections in total. A registered dealer normally files all the outward supplies in GSTR-1. The system works in such a way that the auto-population of those files happens in GSTR-2A.

In GSTR-4A, the auto-population of those files which the suppliers use to upload the details of their outward supplies in GSTR-1/GSTR-5, as well as GSTR-7, happens. These can be used by the composition dealers when acting as a recipient.

This implies that the details of the purchases undertaken by any composition dealer will be available in GSTR-4A. It happens automatically as soon as the information is entered by the registered suppliers in GSTR-1/GSTR-5 and GSTR-7. They have to make sure that the information is updated alongside the specific composition dealer’s GSTIN.


Composition return in GST happens in a smooth way as the whole process falls under the form called GSTR-4.  It can be used by all taxpayers who are eligible as per the composition scheme provisions and are registered under it. The auto-population of details in the working of GSTR-4 makes it easier for both the suppliers as well as composition dealers to keep track of the system effectively.