Articles related to all about the Composition Levy of Scheme (Section 10 of CGST Act 2017) whose turnover described below a certain limit. Article covers Limit under Composition scheme, What is Aggregate Turnover, Person not entitled to avail Composition scheme under GST, 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 and 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.

1. Limit under GST 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 1.5 crore (As amended by the Notification Notification No. 14/2019 – Central Tax New Delhi, the 7th March, 2019.) The limits for special category states [(i) Arunachal Pradesh (ii) Uttarakhand (iii) Manipur (iv) Meghalaya (v) Mizoram (vi) Nagaland (vii) Sikkim (viii) Tripura] remains 75 lakhs.

It may be noted that till 2018-19, Himachal Pradesh and Assam was in the special category states which is not there in the notification 14/2019 and hence registered persons registered in Himachal Pradesh can take benefit upto the turnover of 150 lakhs. Uttarakhand was not there in special category state upto the financial year 2018-19 and benefit upto the full limit [one crore] was available there under composition scheme. In the present notification, the limit has been reduced to 75 lakhs in Uttarakhand.

2. 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).

It has been clarified vide order No. 01/2017 date 13 October 2017 that for computing the aggregate turnover for eligibility for the scheme, the turnover of exempted services, including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, supplied by a taxpayer will not be included.

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.

3. Persons not entitled to avail Composition Scheme

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

However , A person eligible for composition scheme also supplying exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, would not become ineligible for the composition scheme.

As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of 10% of turnover, or `5 Lakhs, whichever is higher. This amendment is applicable from the 1st of Feb, 2019.

*As per 32nd GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax Scheme, and the Government has set the threshold turnover for service providers at `50 Lakhs to be eligible for this scheme.

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

This condition means that if a registered person is engaged in supply of something not leviable to tax under CGST Act, he shall not be eligible for this scheme. “Not leviable to tax” under this Act does not mean mere exempted goods. It refers to goods which cannot be taxed under this Act. Thus, a person who is engaged in supply of alcoholic liquor for human consumption or a restaurant serving alcoholic liquor cannot opt for this scheme.

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

(d) A taxable person 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 of the Act.

(e) A taxable person is not a manufacturer of such goods as may be notified by the Government on the recommendation of the GST council.

(f) Where more than one registered person is having the same Permanent Account Number issued under the Income-tax Act, 1961, the registered person shall not be eligible to opt for the composition scheme unless all such registered persons are eligible under composition scheme and opt to pay tax under the scheme.

4. Conditions & Restrictions for GST Composition Levy

( As per Rule 5 of Chapter II of the CGST

The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:-

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

(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 by a dealer migrating to GST scheme starting from appointed day;

(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;

(e) he was not engaged in the manufacture of goods as notified under clause (e) of sub-section (1)of section 10, during the preceding financial year;

(f) he shall mention the words “composition taxable person, not eligible to collect taxon supplies” at the top of the bill of supply issued by him; and

(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 ”

A casual taxable person, or a non-resident taxable person is not eligible for composition scheme.

Composition scheme can be opted on the condition that goods held in stock by the person opting for the scheme on the appointed day has not been purchased in course of inter-state trade, or imported from outside India. Further goods held in stock has not been purchased from unregistered dealer.

5. Form to be submitted:

(a) For persons already registered under Pre – GST regime

Sr. No. FORM Purpose for which form to be filed online Due date of filing
(i) 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
(ii) 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

(b) Person registered under GST and person switches to composition Scheme

(iii) 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
(iv)

 

 

GST- CMP- 04 Intimation/Application for withdrawal from Composition levy Within 7 days of occurrence of event
(v)

 

 

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
(vi)

 

 

GST- CMP- 06 Reply of show cause notice given by the taxable person Within 15 days of received of Show Cause Notice
(vii)

 

 

GST- CMP- 07 Issue of Order for acceptance/rejection of reply to show cause notice Within 30 days of received of SCN
(viii)

 

 

GST REG- 01 Registration Certificate under Composition Scheme (for person who applied for fresh register under GST to opt scheme) Prior to appointed date
(ix)

 

 

GST ITC-01

 

Details of input in stocks, semi-finished and finished goods 30 days of composition scheme option withdrawn
(x)

 

 

GST ITC-03

 

Intimation of ITC (Input Tax Credit) available Within 60 days of commencement of the financial year.

6. Composition Rate of Tax

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

Rate of tax has been prescribed under Rule 7 of the CGST Rules [Notification No. 05/2019 – Central Tax New Delhi, the 29th January, 2019], which is 0.5% on goods and 2.5% for restaurants. If services are supplied within the limits allowed in Section 10, such services shall attract a tax rate of 0.5%.

7. GST Composition Returns

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

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.

CBIC has amended the Rule 62 under the CGST Rules, 2017. Form GST CMP 08 has been inserted. This amendment has been effected vide Notification No. 20/2019 Central Tax dt. 23 April 2019 (i.e. CGST 3rd Amendment Rules 2019). The compliance under composition scheme shall be simplified as now they would need to file one annual return but payment of taxes would remain quarterly (along with a simple declaration).

5. 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.

9. 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.

10. 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

(Article is republished with amendments by Taxguru Team &  CA Anita Bhadra)

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One Comment

  1. B C BHAT says:

    Excellent Article. Please clarify if I opt for Composite Levy of tax, whether I have to pay 1% GST for exempted goods also. For e.g. I am selling Rice, Dal etc. that is exempted from GST. I am also selling Coffee/Tea powder which is taxable. My total turnover is Rs.1.00cr. Should I pay GST for sale of Rice & Dal also at 1%. Your valued opinion can be sent through mail please

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