1. Intimation of Composition Levy
Rule 1(1) of draft GST Composition Rules provide that any person who has been granted registration on a provisional basis under sub-rule (1) of rule Registration. 16 and who opts to pay tax under section 10, shall electronically file an intimation in FORM GST CMP-01, duly signed, on the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner, prior to the appointed day, but not later than thirty days after the said day, or such further period as may be extended by the Commissioner in this behalf.
The declaration filed prior to appointed date will not have any legal sanctity due to non-existence of statute
- It is suggested that filing date of declaration be only after appointed date and within 180 days.
- Also, it be clarified that time limit will apply from date of grant of certificate of registration.
2. Conditions & Restrictions for Composition Levy
Rule 3 of draft GST Composition Rules deals with Conditions and Restrictions for composition levy. Rule 3(1)(b), (c), (d) & (g) thereof requires a person opting for composition scheme to comply with the following conditions:
c) the goods held in stock by him have not been purchased from an unregistered person and where purchased, he pays the tax under sub-section (4) of section 9;
d) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both received from un-registered persons;
g) he shall mention the words “composit on taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
- A person opting for composition levy will primarily be a small trader. He will obviously have stock containing purchases from unregistered dealers. He will also make purchases as well as avail services from unregistered persons. If such person is made liable to pay tax on such inward supply of goods or services, it will become a part of his cost as he will not be eligible to claim input tax credit on the same. Further, he will also be required to pay tax on such purchases and receipt of services at full rate. Such a provision will act as a deterrent for him to go for this scheme.
- Mere non-display of the words “composition taxable person” on every notice or signboard will penalise the assessee.
- It is suggested that the conditions specified in Rule 3(1)(c) & (d) requiring a person opting composition levy to pay tax under reverse charge be removed.
- Further, the requirement of displaying the words “composition taxable person”on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business be dispensed with.
3. Validity of Composition Levy
Rule 4(4) of draft GST Composition Rule provides that where the proper officer has reasons to believe that the registered person was not eligible to pay tax under section 10 or has contravened the provisions of the Act or these rules, he may issue a notice to such person in FORM GST CMP-05 to show cause within 15 days of the receipt of such notice as to why option to pay tax under section 10 should not be denied.
There shall be a limitation period beyond which the proper officer may not issue the notice for showing cause as to why the option shall not be denied. If it is not specified, there is always an uncertainty upon the person as to his eligibility for the concessional tax status.
It is suggested that a time limit be provided beyond which the proper officer may not issue a notice to the person who is not eligible to pay tax under section 10 or has contravened the provisions of the Act or these rules.
4. Condition of not having stocks of Imported goods
As per rule 3(1)(b) of draft GST Composition Rules a composition dealer is required to comply with following condition: –
The goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 1;
It seems that restriction in such cases is imposed since the dealer pays a lower or concessional rate of tax on such purchases at present and he will be going to pay tax at Composition rate. However, imports are brought after paying at full rates of BCD, CVD and SAD. No Concession whatsoever is granted in the tax rates of Imports. Thus, restriction of such purchases is unjustified.
Also, it is very difficult to recognize which item was purchased from outside state or from unregistered dealer out of closing stock held on appointed date.
It is suggested that the condition for not having stocks of Imported goods be removed.