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GST Composition Scheme Rules under CGST Rules 2017

Sec 10 of CGST Act 2017 explains the composition levy under Goods and Services Tax. Chapter II of the CGST Rules 2017 deals with the various propositions of levy of composition scheme under the CGST Act 2017. Rule 3-7 of Chapter II of the CGST Rules 2017(as amended upto 06th July 2018) have been reproduced below

Sec 10 of CGST Act 2017 explains the composition levy under Goods and Services Tax. Chapter II of the CGST Rules 2017 deals with the various propositions of levy of composition scheme under the CGST Act 2017. Rule 3-7 of Chapter II of the CGST Rules 2017 (as amended upto 06th July 2018) deals with Rules Related to Composition Levy Under GST Law which includes-

Rule 3 Intimation for Composition Levy
Rule 4 Effective date for composition levy
Rule 5 Conditions and restrictions for composition levy
Rule 6 Validity of Composition Levy
Rule 7 Rate of the Composition Levy

Rule 3- Intimation for composition levy under GST Law

There can be 3 different situations under this category

a. Persons already registered under pre-GST regime i.e under VAT/ Service Tax etc

b. Persons applying for fresh registration under GST to opt for composition scheme

c. Already registered under GST and person switches to Composition Scheme

 a. Persons already registered under pre-GST regime i.e. under VAT/ Service Tax etc
  • Registration under GST will be granted on provisional basis
  • Intimation to be filed in FORM GST CMP-01
  • The intimation should be duly signed
  • The intimation has to be filed  either before or within 30 days of appointed date
Consequences of not filing the intimation within 30 days of the appointed date

a. the registered person will not collect taxes

b. Issue Bill of supply for supplies

 
  • Form GST CMP 03 must also be filed within 60 days of the exercise of option alongwith the following details
  • Details of stock
  • Inward supply of goods received from unregistered persons held by him on the date preceding the day of exercise of option
b. Persons applying for fresh registration under GST to opt for composition scheme
  • Intimation in form GST REG-01 must be filed.
c. Already registered under GST and person switches to Composition Scheme
  • Intimation in Form GST CMP-02 for exercise option
  • Statement in Form GST ITC -3 for details relating to inputs lying in stock, inputs contained in semi finished or finished goods within 60 days of commencement of the relevant financial year.

Rule 4- Effective date for Composition levy under GST Law

a. Persons already registered under pre-GST regime i.e. under VAT/ Service Tax etc Appointed Day
b. Persons applying for fresh registration under GST to opt for composition scheme date of grant registration (where the application for registration has been submitted within 30 days from the day he becomes liable for registration , such date)
c. Already registered under GST and person switches to Composition Scheme Filing of Intimation

Rule 5- Conditions and restrictions for Composition Levy under GST Law

1. The composition scheme is not available for casual taxable person and non resident taxable persons

2. The composition scheme is not available for the following goods-

a. Interstate Purchases

b. Imported Goods

c. Purchases from the branch situated outside the state

d. Agents or Principal situated outside the state

3. If the stock held by the dealer includes the goods purchased from the unregistered person, there can be two options with the dealer as explained below-

Purchases from the unregistered dealer are part of stock held in trade either pay tax on such purchases or do not hold such goods Inward supply of goods/ services or both tax has to be paid by the dealer

4. Display related conditions(Mandatory in nature)-

a. Bills of Supply of the dealer opting for Composition levy

“Composition taxable person not eligible to collect tax on supplies”

b. Notices and Signboards at prominent places including his principal place of business and every additional place of business

“Composition Taxable Person”

5. Manufacturer of following goods(notified under clause e of subsection 2 of section 10 during preceding financial year), cannot opt for Composition Scheme under Goods and Services Tax

– Manufacturers of Ice creams

– Manufacturers of Tobacco Products

Rule 6- Validity of Composition Levy under GST Law

Although the law is very clear in terns of its requirements that the registered person who will satisfy all the above mentioned conditions and will meet the eligibility criteria of the scheme, will continue to avail the benefits of the Composition Scheme. However there are certain specific clauses which explains the validity of the Composition Levy, explained as follows-

Case 1

If all conditions satisfied Will be remain under Composition Levy
If conditions not satisfied The consequences will include-

– Pay tax as a normal tax payer

– Issue tax invoice for taxable supply

–  File form GST CMP-04 as an intimation to the concerned within 7 days

 Case II

Self Withdrawal An application is required to be filed in form GST CMP-04 before the date of withdrawal by the assesse

 Case III

As per Proper Officer when the taxpayer is not eligible or has contravened the Act or rules The consequences will include-

– Issue of Show Case Notice in Form GST CMP-05

– The reply has to be filed by the tax payer in form GST-CMP-06 within 15 days from the date of issue of show cause notice

– The order will be issued within 30 days in form GST CMP 07

The order will contain wither the acceptance of the reply given by the assesse or the denial of the reply

–  If the reply is accepted then the assesse may continue to enjoy the benefits of composition levy

–  If the reply is not accepted then the assesse needs to proceed with following-

a. Statement in form GST ITC 01 within 30 days of the intimation, application or order

b. Details of stocks of inputs

c. Details of inputs contained in semi finished or finished goods.

 Rule 7- Rate of the Composition Levy

Tax rate applicable to a dealer opting for Composition Scheme

  CGST SGST Total
Manufacturers and Traders 0.5% 0.5% 1%
Restaurants not serving Alcohol 2.5% 2.5% 5%

View Comments (1)

  • INWARD SUPPLIES FROM AGRICULTURIST VIZ. GROUNDNUT AND AFFTER MILL GROUND NUT GOT OIL AND DEOILCAKE. WHETHER COMPOSITION DEALER PAY 1% ON SALES OF BOTH ITEMS. WHAT ABOUT UNREGISTERED PURCHASES IN SUSPENSION OF SECTION 9(4). DEALER IS COMPOSITION DEALER.PLEASE REPLY.

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