CA Keshav Garg, Chandigarh

Quick understanding of Composition levy under section 8:

Who is eligible:

Registered Taxable person whose aggregate turnover as defined by  section 2(6) of Draft Model GST Law, 2016 which includes both taxable and non-taxable supplies, exempt supplies and exports in a financial year does not exceed Rs. 50 Lakhs. Aggregate Turnover does not include supplies on which tax is paid under reverse charge or by a job-worker on behalf of principal supplier.

Who is not eligible:

Registered Taxable Taxpayer who:

1.   Turnover exceeds Rs. 50 lakhs; or

2.   Effects Inter-State Supplies of goods and/or services

Condition for Composition Levy:

The Taxable person shall not:

1.   collect any tax from the recipient;

2.   be entitled to any credit of input tax.

Rate of tax under Composition Levy

1% on the supplies made by the compounding supplier.

Penalty for fraudulently taking the benefit:

Penalty equivalent to the amount of tax evaded.

What would happen if the turnover crosses Rs 50 lakhs

The moment the aggregate turnover of the taxable person exceeds Rs 50 lakhs, he/she shall be automatically covered under the normal provisions of the law i.e. under section 7 of this Act.

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