GSTR-4: Annual Return for Composition Scheme Taxpayers

GSTR-4 is the annual return filed by taxpayers registered under the GST Composition Scheme. If your business has opted for the composition scheme to benefit from simplified compliance and lower tax rates, GSTR-4 is the annual summary you must file. Here is everything you need to know about it.

What is the GST Composition Scheme?

The composition scheme is a simplified tax option for small businesses. Eligible taxpayers pay GST at a fixed lower rate on their turnover, instead of the standard GST rates. They cannot collect GST from customers and cannot claim Input Tax Credit.

Eligibility: Businesses with aggregate turnover up to Rs. 1.5 crores (Rs. 75 lakhs for special category states) in the preceding financial year can opt for the scheme for goods. Service providers and mixed supply businesses can opt if turnover is up to Rs. 50 lakhs.

What is GSTR-4?

GSTR-4 is an annual return that composition taxpayers must file. It provides a consolidated summary of:

– Outward supplies made during the year.
– Inward supplies attracting reverse charge.
– Tax paid during the year through quarterly CMP-08 challans.
– Any unpaid tax balance.

What is CMP-08?

Before GSTR-4 was converted to an annual return in FY 2019-20, composition taxpayers used to file quarterly GSTR-4 returns. Now, they file:

– **CMP-08:** A quarterly self-assessed tax challan (due by the 18th of the month following each quarter) declaring outward supply summary and paying tax.
– **GSTR-4:** An annual return filed once a year.

CMP-08 is a payment declaration, not a detailed return. GSTR-4 consolidates the entire year.

Due Date for GSTR-4

GSTR-4 must be filed by **30th April** of the financial year following the year for which it is filed. For FY 2024-25, the due date is April 30, 2025.

What GSTR-4 Contains

GSTR-4 includes:

– Details of inward supplies (auto-populated from GSTR-2B for supplies attracting reverse charge).
– Outward supplies made to registered and unregistered persons.
– Summary of taxes paid in CMP-08 during the year.
– Any additional tax liability or excess payment.
– Details of inward supplies from an unregistered person attracting reverse charge.

Tax Rates Under the Composition Scheme

– Manufacturers: 1% of turnover (0.5% CGST + 0.5% SGST).
– Restaurants not serving alcohol: 5% of turnover (2.5% CGST + 2.5% SGST).
– Other eligible businesses: 1% of turnover.
– Service providers (composite taxpayers under 10(5) notification): 6% of turnover.

Late Fee for GSTR-4

If GSTR-4 is not filed by the due date, a late fee of Rs. 200 per day applies (Rs. 100 CGST + Rs. 100 SGST), subject to a maximum of Rs. 5,000.

Practical Example

Mohan’s Sweet Shop in Pune opted for the composition scheme in FY 2024-25 with a turnover of Rs. 80 lakhs. He pays tax quarterly via CMP-08 at 1% of quarterly turnover. By April 30, 2025, he files GSTR-4 consolidating all four quarters, confirming a total tax paid of Rs. 80,000 (1% of Rs. 80 lakhs), and reconciling the amounts paid through CMP-08.

Who Cannot Use the Composition Scheme?

The following cannot opt for the composition scheme:

– Manufacturers of notified goods (ice cream, pan masala, tobacco, etc.).
– Persons making inter-state outward supplies.
– Casual taxable persons or non-resident taxable persons.
– Businesses supplying goods through e-commerce operators who collect TCS.

Key Takeaways

– GSTR-4 is the annual return for composition scheme taxpayers, due by April 30 each year.
– Composition taxpayers also file quarterly CMP-08 challans for tax payment during the year.
– Composition scheme is available for businesses with turnover below Rs. 1.5 crore (Rs. 50 lakh for services).
– Composition taxpayers cannot collect GST from customers or claim ITC.
– Tax rates: 1% for manufacturers and traders, 5% for restaurants, 6% for eligible service providers.
– Late fee for GSTR-4: Rs. 200 per day, maximum Rs. 5,000.

If you are a small business looking for simplified GST compliance, the composition scheme combined with CMP-08 and GSTR-4 keeps your compliance burden light while keeping you fully compliant.