Indirect
Taxation
Goods and Services Tax
Composition
Levy Scheme
[Section
10 of the CGST Act, 2017]
1. Under composition scheme a taxable person is not required to maintain elaborate records and file
detailed returns. Such a person (Seller/Supplier) is not allowed to charge GST in his Invoice although he will
have to pay GST on his total turnover out of his own pocket at the rates as
given in the following table:
Rates of GST under Composition Scheme
|
Type of business |
Rate of GST |
|
If he is a manufacturer |
1% |
|
If he is a trader |
1% |
|
If he is a provider of restaurant service |
5% |
|
If he is a provider of any service other than
restaurant service |
6% |
Any dealer registered under Composition Scheme will not be eligible to
take credit of Input Tax on purchases at the time of paying output GST on his
supply of goods. Also, the buyer of these goods will not get the credit of
input taxes paid on such goods at the time of paying his output GST.
A registered person can opt for a
composition scheme if his aggregate turnover in the preceding financial year
did not exceed –
|
Case |
Limit |
|
If the registered person is engaged in supply of
goods and/or restaurant service |
Rs 1.5 Crore (This limit is Rs 75 Lakh for the following states: 1. Arunachal Pradesh, 2. Manipur, 3. Meghalaya, 4. Mizoram, 5. Nagaland, 6. Sikkim, 7. Tripura, and 8. Uttarakhand). |
|
If the registered person is engaged in supply of
service other than restaurant service |
Rs 50 Lakh |
2. As per
Section 10(2) of the CGST Act, 2017 the benefit of composition scheme shall not
be granted if a taxable person is:
i.
Engaged
in the supply of other services along with supply of goods and/or restaurant
service where turnover of such other services exceeds higher of the following
two:
(a)
10%
of turnover in a State or UT in the preceding financial year, and
(b)
Rs
5,00,000;
ii.
Engaged
in the making any supply of goods or services which are not taxable under GST;
iii.
Engaged
in making any inter-state outward supplies of goods or services;
iv.
Engaged
in making any supply of goods or services through an e-commerce operator who is
required to collect tax at source u/s 52;
v.
Either
a casual taxable person or a non-resident taxable person;
vi.
A
manufacturer of
(a)
Ice
cream and other edible ice, whether or not containing cocoa; or
(b)
Pan
masala; or
(c)
Tobacco
and manufactured tobacco substitutes; or
(d)
Aerated
water; or
(e)
Fly
ash bricks, fly ash aggregate with 90% or more fly ash content; or
(f)
Fly
ash blocks; or
(g)
Bricks
of fossil meals or similar siliceous earth; or
(h)
Building
bricks; or
(i)
Earthen
or roofing tiles.
3. Where more than
one registered persons are having the same Permanent Account Number (PAN), the
registered person shall not be eligible to opt for the composition scheme unless
all such registered persons opt to pay tax under the same scheme.
4. As per Section 10(3) of the CGST Act, 2017 the option
availed of by a registered person for composition scheme shall lapse with
effect from the day on which his aggregate turnover during a financial year
exceeds the threshold limit.
5. As per Section
10(4) of the CGST Act, 2017 a taxable person, who opts for composition levy, shall not collect any tax from the recipient on supplies
made by him nor shall he be entitled to any credit of input tax.
6. As per Section
10(5) of the CGST Act, 2017, if the proper officer has reasons to believe that
a taxable person has paid tax under composition scheme, despite not being
eligible, such person shall, in addition to any tax that may be payable by him
under any other provisions of this Act, be liable to a penalty and the provisions
of Section 73 or Section 74 shall, mutatis mutandis, apply for
determination of tax and penalty.
Indirect Taxation
Goods and Services Tax
Composition Levy Scheme
Selected Problems
Illustration: 1
Hotel King Pvt. Ltd. is a
registered person under GST. P.Y. turnover was Rs 100 lakhs. Applicable GST
rate is 18%. Inputs cost Rs 7, 80,000 (exclusive of GST @ 18%). Profit margin
is 40% on cost. Find the invoice price and advice the best option to pay tax if
any. There is no opening balance and closing balance for the tax period.
Illustration: 2
X & Co. being a supplier of
taxable and exempted services registered under GST law in the State of
Maharashtra and furnished the following information pertaining to the preceding
financial year:
(Rs in lakh)
|
Particulars |
Rs |
|
Intra-State supply of taxable output services |
22 |
|
Intra-State supply of exempted supplies |
28 |
|
Interest earned on deposits / loans / advances |
5 |
Turnover
during the 1st Quarter of the current financial year:
(Rs in lakh)
|
Particulars |
Rs |
|
Intra-State supply of taxable output services |
2 |
|
Intra-State supply of exempted supplies |
8 |
|
Interest earned on deposits / loans / advances |
5 |
Find
the following:
(a)
Is X & Co. eligible to
opt for composition scheme in the current financial year?
(b) If
so, what is the CGST & SGST liability of X & Co. for the 1st quarter of
the current financial year?
Illustration: 3
Mr. Sitaram is running a
consulting firm and also a readymade garment show room, registered in same PAN.
Turnover of the showroom is Rs 60 lakh and receipt of the consultancy firm is
Rs 12 Lakh in the preceding financial year.
You are required to answer
the following:
(a)
Is Mr. Sitaram eligible for
Composition Scheme?
(b)
Is it possible for Mr.
Sitaram to opt for composition
scheme only for the Showroom?
(c)
Is Mr. Sitaram eligible for
Composition Scheme, if he is running a restaurant as well as readymade garment
show room as a single business (without any consulting firm) having total
turnover Rs 72 Lakh in the preceding financial year?
(d) Is
Mr. Sitaram eligible for Composition Scheme, if the turnover of garment
showroom is Rs 75 Lakh in the preceding financial year and there is no
consulting firm?
Illustration: 4
M/s C Ltd. of Chennai being a trader provided the
following information relating to the preceding financial year:
(Rs in lakh)
|
Particulars |
Rs |
|
Intra-State supply of taxable goods |
20 |
|
Intra-State supply of exempted goods |
30 |
|
Intra-State supply of taxable services |
5 |
|
Intra-State outward supply of services on which
recipient is liable to pay GST under Reverse Charge Mechanism (RCM) |
4 |
|
Inter-State inward supply of goods |
200 |
|
CGST and SGST paid |
2 |
Is
M/s C Ltd. eligible for composition scheme in the current financial year?
Illustration: 5
Ritesh of Assam provides the following information for the preceding
financial year 2021-22. You are required to find out the aggregate turnover for
the purpose of eligibility of composition levy scheme and determine whether he
is eligible for composition levy scheme or not for the financial year 2022-23.
(Rs in lakh)
|
Particulars |
Rs |
|
Value of taxable outward supplies (including Rs
10 lakh supplied in course of inter-state transaction) |
75 |
|
Value of exempt supplies (which include Rs 30
lakh received as interest on loans and advances) |
70 |
|
Value of inward supplies on which he is liable to
pay tax under reverse charge |
15 |
|
Value of exports |
7 |
All
the amounts are exclusive of GST. Further, he assured that in the Financial
Year 2022-23 no inter-State supply would be executed by him.
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