Composition Scheme under GST | Section 10 | CGST Act 2017

Composition Scheme was introduced for small taxpayers, so that they can get rid of tedious GST formalities and pay indirect tax at a fixed rate of turnover.

♦ Eligibility :-

1. It is an optional scheme available to taxable person, Taxable person can opt for the scheme if aggregate turnover is upto Rs. 1.5 crore in the preceding financial year.

2. However, the aggregate turnover in the preceding financial year shall be Rs. 75 lakh in any of the following states :-

Special Category States

Arunachal Pradesh	Manipur	Meghalaya
Mizoram	Nagaland	Sikkim
Tripura	Uttarakhand

♦ How to Compute Aggregate turnover

Following are inclusions and Exclusions from “Aggregate turnover” :-

INCLUSIONS	EXCLUSIONS
Value of all outward supplies i.e. ❖ Taxable Supplies ❖ Exempt Supplies ❖ Exports ❖ Inter-State Supplies Of persons having Same PAN  to be computed on all India basis.	❖ CGST ❖ SGST ❖ UTGST ❖ IGST ❖ Cess ❖ Value of all inward supplies on which tax is payable under Reverse Charge.

♦ Rates under composition scheme

S.No.	Eligible Person	Rate of tax cannot exceed (% of turnover)		Total rate of tax cannot exceed
		CGST	SGST
(a)	Manufacturer	0.5% of turnover in State/UT	0.5% of turnover in State/UT	1% of turnover in State/UT
(b)	Restaurant Service	2.5% of turnover is State/UT	2.5% of turnover is State/UT	5% of turnover is State/UT
(c)	Other Supplies	0.5% of turnover of taxable supplies of goods & services in State/UT	0.5% of turnover of taxable supplies of goods & services in State/UT	1% of turnover of taxable supplies of goods & services in State/UT

♦ Whether taxable person opting for composition scheme can also supply services? (second Proviso to section 10(1))

Person who opts to pay tax under composition scheme may supply services of value :-

(a) Not exceeding 10% of turnover in a State/UT in the preceding financial year or

(b) Rs 5,00,000

Whichever is higher.

♦ Who are not eligible to opt for composition scheme

Broadly 5 categories of registered persons are not eligible to opt composition scheme :-

(i) Supplier of services other than those mentioned above.

(ii) Supplier of goods which are not taxable under CGST Act/ SGST Act/ UTGST Act.

(iii) Person engaged in making Inter-state Supply of goods

(iv) Person supplying goods through an E-Commerce Operator who is required to collect tax at source u/s 52.

(v) Manufacturer of certain notified goods

– Ice-cream and other edible ice, whether or not containing cocoa

– Pan Masala

– Aerated waters

– Tobacco & manufactured tobacco substitutes

♦ Other Important Points

> Option to pay under composition scheme lapses as and when aggregate turnover crosses Rs 1.5 crore/ 75 lakh

> Composition tax cannot be collected from recipients, as it is a benefit provided to supplier by lowering the rates.

> ITC cannot be availed by composition supplier.

> In case of irregular availment, registered person shall be liable to pay tax and also be liable for penalty

> Composition scheme is not applicable on supplies on which tax is payable under RCM.

> Customers are not entitled to take credit of tax paid under composition scheme.

> Supply of exempted services by way of extending deposits, loans or advances in so far as consideration is represented as interest or discount shall not be taken into account

• • For determining eligibility of composition scheme which provides provision of service under composition scheme
  • In computing aggregate turnover.

♦ Presumptive Scheme For Services Suppliers and Mixed Suppliers

• CBIC vide notification no. 2/2019-CT (Rate), dated 07-03-2019 in which a taxpayer has been allowed to pay GST on a presumptive basis @ 6% (3% CGST and 3% SGST/UTGST).
• Eligible person can take benefit under this scheme with effect from 01-04-2019 only in respect of intra-state supplies of goods or services or both.

> Conditions for opting Presumptive Scheme

• Registered person can opt if his aggregate turnover in the preceding financial year does not exceed Rs 50 lakh.
• Value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken in account while computing aggregate turnover.
• He is not eligible to pay tax u/s 10 under composition scheme.
• He is not engaged in making supply of goods on which GST is not leviable.
• Inter-State outward supply of goods and services is also prohibited.
• He is neither a casual taxable person nor a non-resident taxable person.
• He is not engaged in making any supply through an E-Commerce Operator who is required to deduct tax at source u/s 52.
• He is not engaged in making Supplies of Notified Goods:-
  • Ice-Cream and other edible ice, whether or not containing Cocoa.
  • Pan Masala
  • Tobacco and Manufactured tobacco substitutes.
• Presumptive tax is not to be collected from recipients and ITC is not admissible.
• Presumptive Scheme is not applicable on supplies in which tax is payable under RCM.
• Registered person should issue bill of supply instead of invoice and mention the following words at the top of the bill of supply :

“Taxable person paying tax in terms of notification No. 2/2019-CT (Rate) dates 07-03-2019, not eligible to collect tax on supplies”.

• Rates of Tax

Description of Supply	Rate of tax cannot exceed (% of turnover)		Total rate of tax cannot exceed
	CGST	SGST
First supplies* of goods or services upto an aggregate turnover of Rs 50 lakh made on or after the 1st day of April in any F.Y.	3% of aggregate turnover in the State/UT	3% of aggregate turnover in the State/UT	6% of aggregate turnover in the State/UT

* First Supplies

• For the purpose of determining eligibility of Scheme it includes the supplies made on 1st day of april to the date from which he become liable for registration under the said act.
• For the purpose of payment of tax it shall not include the supplies from the 1st day of april to the date from which he becomes liable for registration i.e. tax is to be paid after he becomes liable for registration (supplies made after crossing threshold limit for registration)

> Restrictions under Presumptive Scheme

• He is neither a casual taxable person nor a non-resident taxable person.
• Goods held in stock have not been purchased from unregistered dealer and if purchased he paid the tax u/s 9(4).
• This Scheme is not applicable on inward supplies taken on which RCM is applicable.
• He shall mention the words “composition taxable person” on every notice or signboard displayed at his principal place of business and at every additional place of business.
• Composition Supplier is not required to file fresh intimation every year.

♦ Form and Manner of submission of statement and returns

> Registered person paying tax u/s 10 or as per notification No.02/2019-CT(R) dated 07-03-2019 shall electronically furnish –

• • Quarterly Statement in GST CMP-08 containing details of self assessed tax paid, by 18th of the month succeeding such quarter and
  • A return,GSTR-4, for every financial year on or before 30th April following the end of such financial year.

> Return furnished shall include invoice-wise inter-state and intra-state inward supplies received from registered and unregistered person and consolidated details of outward supplies made.