Section 10 (Composition levy) of CGST ACT states – Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees (one crore and fifty lakh rupees w.e.f 1 February 2019), may opt to pay, [in lieu of the tax payable by him under sub-section (1) of section 9, an amount calculated at such rate] as may be prescribed, but not exceeding,––
(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and
(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers,
subject to such conditions and restrictions as may be prescribed:
Further under section 2(112) of CGST act – “turnover in State” or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess;
Since the definition of turnover as specified under section 2(112) of the CGST Act includes exempt supplies also. Hence, it must be inferred that any person registered under composition scheme is required to pay tax at the rates prescribed in Rule 7 of CGST Rules 2017 (as amended upto 30th July 2020) on “Turnover in State or turnover in Union Territory” i.e; the said registered person is required to pay tax not only on taxable supplies but also on supplies made by him within the State or Union territory which are otherwise exempt under GST.