COMPOSITION LEVY

Q1. Can we opt for Composition in the middle of the Year?

A1. No. but last date is 30.09.2019.

However as per Rule 3(3), the dealer should inform prior to commencement of the year, the bare rule represent is as follows:-

Rule 3(3) Any registered person who opts to pay tax under section 10 shall electronically file an intimation in FORM GST CMP-02, duly signed or verified through electronic verification code, on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, prior to the commencement of the financial year for which the option to pay tax under the aforesaid section is exercised. and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of sub-rule (4) of rule 44 within a period of sixty days from the commencement of the relevant financial year.

Q2. Who can be eligible for Composition scheme?

A2. In order to avail the composition scheme the annual turnover limit for the preceding financial year has been increased from 1 crore to 1.5 crore. Earlier GST turnover threshold for obtaining the composition scheme was 1 crore which is now raised to 1.5 crore and in some states it is 75 lakhs.

A Composition dealer exclusively engaged in trading of goods then opt the composition now as per amendment W.e.f from 01.02.2019) he can perform some service, the exact amended portion are reproduced for your ready reference:

“Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.”

Hence a manufacturer, Trader (Includes some service portion) can opt for composition scheme subject to above conditions.

New or Alternate / Presumptive Composition levy for those who is not eligible to pay tax under sub-section (1) of section 10 of the said Act Can opt this scheme hence service provider are also take benefit for this notification 2/2019 CT(R) :

Further, the council also decided to provide benefit is this composition scheme to service providers. The threshold limit of turnover for preceding financial year has been set to 50 lakhs for suppliers of services or mixed suppliers and the Tax rate for the same would be 6% (i.e., 3% CGST + 3% SGST). The Prescribed Conditions are enumerated below:

Description of supply Conditions
(1) (2)
First supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees made on or after the 1st day of April in any financial year, by a registered person. 1.Supplies are made by a registered person, –

(i) whose aggregate turnover in the preceding financial year was fifty lakh rupees or below;

(ii) who is not eligible to pay tax under sub-section (1) of section 10 of the said Act;

(iii) who is not engaged in making any supply which is not leviable to tax under the said Act;

(iv) who is not engaged in making any inter-State outward supply;

(v) who is neither a casual taxable person nor a non-resident taxable person;

(vi) who is not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52; and

(vii) who is not engaged in making supplies of the goods, the description of which is specified in column of the Annexure below and falling under the tariff item, sub-heading, heading or Chapter,. These are Ice cream and Chapter 24 Goods: All goods, i.e. Tobacco and manufactured tobacco substitutes.

2.Where more than one registered persons are having the same Permanent Account Number, issued under the Income Tax Act, 1961(43 of 1961), central tax on supplies by all such registered persons is paid at the rate specified in column (2) under this notification.

3. The registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

4. The registered person shall issue, instead of tax invoice, a bill of supply as referred to in clause (c) of sub-section (3) of section 31 of the said Act with particulars as prescribed in rule 49 of Central Goods and Services Tax Rules.

5. The registered person shall mention the following words at the top of the bill of supply, namely: – ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.

6. The registered person opting to pay central tax at the rate of three percent under this notification shall be liable to pay central tax at the rate of three percent on all outward supplies specified in column (1) notwithstanding any other notification issued under sub-section (1) of section 9 or under section 11 of said Act.

7. The registered person opting to pay central tax at the rate of three percent under this notification shall be liable to pay central tax on inward supplies on which he is liable to pay tax under sub-section (3) or, as the case may be, under sub-section (4) of section 9 of said Act at the applicable rates.

Explanation.-For the purposes of this notification, the expression “first supplies of goods or services or both” shall, for the purposes of determining eligibility of a person to pay tax under this notification, include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the said Act but for the purpose of determination of tax payable under this notification shall not include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the Act.

In computing aggregate turnover in order to determine eligibility of a registered person to pay central tax at the rate of three percent under this notification, 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 into account.

Q3. Is there any restriction for composition levy u/s 10(1)?

A3. Yes, As per Rule 5 there is some restriction these pointed out below:-

The Relevant Rule enumerated below which provide some conditions:

(a)* he is neither a casual taxable person nor a non-resident taxable person;

(e) he was not engaged in the manufacture of goods as notified under clause (e) of sub-section (2) of section 10, during the preceding financial year;

(g) he shall mention 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.

Condition as to Sale:

(b) 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 subrule (1) of rule 3;

* this is the rule number

(f) he shall mention the words ―composition taxable person, not eligible to collect tax on supplies‖ at the top of the bill of supply issued by him;

For Notification 2/2019:

in case of person who opts notification 2/2019, then they should mentioned ‘taxable person paying tax in terms of notification No. 02/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’

Condition as to Purchase:

(c) the goods held in stock by him have not been purchased from an unregistered supplier 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;

As per Section 10(2): The registered person shall be eligible to opt under sub-section (1), if:—

(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;

(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;

(c) he is not engaged in making any inter-State outward supplies of goods;

(d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and

(e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council

Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

As per Section 10(3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).

As per Section 10(4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

Q4. What is Tax Rate in case of Composition levy?

A4.

APPLICABLE GST RATES (COMPOSITION LEVY)
Type of Business CGST SGST TOTAL
Manufacturer and Traders 0.5% 0.5% 1%
Supplier of food & drinks (restaurant business) 2.5% 2.5% 5%
Goods & Services (deemed as composite supply)

Provided turnover of services does not exceeds 10% of total turnover in preceding year or Rs 5 Lakh , whichever is higher

0.5% 0.5% 1%
Goods or services or both (New Levy/Presumptive taxation 3% 3% 6%

Q5. What is the Validity of the Composition dealer?

A5.As per Rule 6(1) The option exercised by a registered person to pay tax under section 10 shall remain valid so long as he satisfies all the conditions mentioned in the said section and under these rules

6(2) The person referred to in sub-rule (1) shall be liable to pay tax under sub-section (1) of section 9 from the day he ceases to satisfy any of the conditions mentioned in section 10 or the provisions of this Chapter and shall issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event.

Q6: Return procedure in case of Composition levy?

A6: After Amendment and Notifications.

Statement for payment of Taxes on Quarterly Basis in GST CMP-08 by 18th of the month succeeding quarter & Annually one GSTR-4 to be file by 30th April following the end of such financial year.

For all whether, Manufacturer, Traders, or service operators.

Name of GST Returns Due Date Details to be submit
CMP-08 18th of Month after Each Quarter End Payment to be made through this statement
GST-4 30th April of every year from end of such financial year. Statement showing sales & purchase made during the year & tax paid on it through CMP-08.

Q7: Registration Process:

A7: Case A- For Unregistered Person:

For new registration under the scheme, intimation in FORM GST REG- 01 must be filed.

Case B – For Registered person wants to shift to composition scheme:

  1. The dealer would Intimate in FORM GST CMP-02 for exercise option.
  1. Then the Statement in FORM GST ITC- 03 for details of ITC relating to inputs lying in stock, inputs contained in semi-finished or finished goods within 60 days of commencement of the relevant financial year

You can reach the author by dialing 91-9654338974. or through email: casrk17@gmail.com

Author Bio

More Under Goods and Services Tax

2 Comments

  1. swapna says:

    hello sir.,
    i have only exempted sale sir .how to show my sale in cmp 08 from, i was file gstr 4 regular but now cmp 08 shows cash error in filing time.01

  2. swapna .palnati says:

    hello sir.,
    i have only exempted sale sir .how to show my sale in cmp 08 from, i was file gstr 4 regular but now cmp 08 shows cash error in filing time

Leave a Comment

Your email address will not be published. Required fields are marked *