Articles related to all about the Composition Levy of Scheme (Section 10 of CGST Act 2017) whose turnover described below a certain limit.

  • Limit under Composition scheme
  • What is Aggregate Turnover
  • Person not entitled to avail Composition scheme
  • Condition & restriction for levy of composition scheme (under Rule 5 of chapter II of CGST Act 2017)
  • Form to be submitted
  • Composition Rate of Tax
  • Penalty for delay in filing GSTR -4
  • Important Notes – Content of Bill of supply

Section 10 of the CGST Act, 2017 provides for composition levy to such person. Such person means whose turnover below a certain limit. Composition Scheme is a simple and easy scheme under GST because of taxable person who opt composition scheme is not required to maintain detailed records and filling of detailed returns.

Limit under Composition Scheme:

As per Section 10(1) of CGST Act, 2017 A registered person whose aggregate turnover in the previous financial year did not exceed Rs. 1.5 crore (Rs. 75 Lakh for Northeastern state included Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh) may opt to pay tax under composition levy.

What is Aggregate Turnover:

As per section 2(6) of CGST Act 2017, “Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable on reverse charge basis), exempt supplies, export of goods or services or both and interstate supplies of persons having the same PAN to be computed on all India basis but excludes (CGST, SGST, UTT, IGST, CESS).

If Supply of goods by job worker after completion of job work treated as a supply of goods by the principal as per section 143 of CGST Act 2017 and value of such goods shall not be included in the calculation of Aggregate Turnover of job worker but it will be included Aggregate Turnover of principal.

Persons not entitled to availed Composition Scheme:

As per section 10(2) of the CGST Act, 2017 declare the person not entitled to availed Composition scheme. The person who not entitle to availed composition scheme mention below:

(1) A taxable person is engaged in the supply of services. (other than restaurant and outdoor catering services)

(2) A taxable person is engaged in making any supply of goods which are not leviable to tax under this act. (exempt supplies)

(3) A taxable person is engaged in making any interstate outward supplies of goods. (one state to another state)

(4) A taxable person is engaged in making any supply of goods through an electronic commerce operator.

(5) A taxable person is a manufacturer of such goods as may be notified by the Government on the recommendation of the council. (Manufacturer of ice cream and other edible ice, whether containing cocoa, Pan Masala, All goods like as Tobacco and tobacco substitutes.)

Condition & Restriction for Composition levy (As per Rule 5 of Chapter II of the CGST Rules, 2017)

The person who opts composition levy is to pay tax under section 10 of (composition levy) CGST Act 2017.

(a) The person opting the composition scheme must be neither a causal taxable person nor a non – resident taxable person.

(b) The goods held in stock by him on the appointed day have not been

a. Purchased in the course of interstate trade or commerce.

b. Imported from a place outside India

c. received from his branch situated outside the state or

d. from his agent or principal outside the state.

(c) The goods held in stock by him have not been purchased from an unregistered supplier and where purchased he pays the tax under reverse charge mechanism. (i.e. section 9(4) of CGST).

(d) Composition Taxable person shall pay tax as per normal tax rates in case of inward supply of goods and services or both received under section 9(3) & 9(4) of CGST Act, 2017. Section 9(3) & 9(4) provides for payment of tax the by recipient of goods or services.

(e) The taxable person not engaged in the manufacture of goods like as ice cream and other edible ice, Pan Masala, Tobacco and manufacture of tobacco substitutes as notified 10(2)(e) of the CGST Act 2017 during the preceding financial year.

(f) Composition dealer mandatory display on invoices “composition taxable person” not eligible to collect tax on supplies at the top of the bill of supply issued by him.

(g) Composition dealer mandatory display of 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 of business.

Form to be submitted:

Sr No. FORM PURPOSE for which form to be filed online DUE DATE OF FILING
For persons already registered under Pre – GST regime
1 GST-CMP-01 Intimation to pay tax under section 10 (composition levy) (Only for persons registered under the existing law migrating on the appointed day) Prior to appointed date or within 30 days of said date beginning of financial year
2 GST-CMP-03 Intimation of details of stock on date of opting for composition levy (Only for persons registered & unregistered under the existing law migrating on the appointed day Within 90 days of exercise option
Person registered under GST and person switches to composition Scheme
1 GST-CMP-02 Intimation to pay tax under section 10 (composition levy) (for person registered under the Act) Intimation of availed opt for scheme middle of the financial year Prior to commencement of Financial year
4 GST-CMP-04 Intimation/Application for withdrawal from Composition levy Within 7 days of occurrence of event
5 GST-CMP-05 Show Cause Notice issued by Proper officer in contravention of rules or Act (Notice for denial of option to pay tax under section 10) In contravention of rules or Act
6 GST-CMP-06 Reply of show cause notice given by the taxable person Within 15 days of received of Show Cause Notice
7 GST-CMP-07 Issue of Order for acceptance/rejection of reply to show cause notice Within 30 days of received of SCN
8 GST REG-01 Registration Certificate under Composition Scheme (for person who applied for fresh register under GST to opt scheme) Prior to appointed date
9 GST ITC-01 Details of input in stocks, semi-finished and finished goods 30 days of composition scheme option withdrawn
10 GST ITC-03 Intimation of ITC (Input Tax Credit) available Within 60 days of commencement of the financial year.

Composition Rate of Tax:

Sr No. Category of Registered Person Rate of CGST Rate of SGST Total
1 Manufacturers other than manufacturers of such goods as may be notified by the Government. 0.5% 0.5% 1.0%
2 Restaurant services and Outdoor catering services (not serving alcohol) 2.5% 2.5% 5.0%
3 Any other supplier eligible for composition levy (section 10) 0.5% 0.5% 1.0%

Returns:

Sr No. Returns to be filed Due Date for filing of Return
1 GSTR – 4 (Quarterly return) 18th of the month after the end of the quarter.
2 GSTR – 9A (Annual return) 31st December of next financial year.

Penalty for delay filing of GSTR 4:

GSTR 04 filed in Quarterly basis within the given time frame but if its not file than penalty levied on it.

Rs. 100 for CGST and Rs. 100 for SGST per day

or

Rs. 5000 each CGST & SGST

whichever is lower.

GSTR 4 cannot be revised after filing on GSTN Portal. Any mistake in the filed return for the month of July to Sept 2017 can be revised in the next quarters return only.

Important Notes for Composition Dealers:

  • No Input Tax Credit (ITC) will be made available to composition levy of tax.
  • Composition dealers cannot make interstate sales.
  • Composition dealers are not required to maintain detailed records.
  • Composition dealers cannot issue Tax Invoice.
  • Composition dealers cannot charge tax from their customers. It should be pay tax out of their own pocket.
  • Composition dealers must issue Bill of Supply instead of Tax Invoice and should mention “composition taxable person” not eligible to collect tax on supplies on their top of Bill of supply.
  • Content of Bill of Supply:
    • Name, Address and GSTIN of the supplier
    • Bill of supply Number and Date of Issue (BOS will have a unique number in financial year)
    • If the recipient has registered then the Name, Address and GSTIN of the recipient.
    • Description of goods/services
    • HSN Code for goods and Accounting code for Services.
    • Value of goods/services after adjusting any discount
    • Signature or Digital signature of the supplier

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice. Neither the authors accept any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

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