From

Excise Taxation Commissioner,
Haryana, Panchkula.

To

All the Dy. Excise & Taxation Commissioners (ST),
in the State of Haryana.

Memo No. 1470/ST-5,
Panchkula, dated the 14.07.2017

Subject: Guidelines on composition and levy on directives/instructions regarding migration.

MEMORANDUM

Please find enclosed herewith a copy of Guidelines on composition and levy on directives/instructions regarding migration is sent herewith for information, necessary action by all the concerned and bring notice to all the officers/officials under your jurisdiction.

Superintendent (Sales Tax)
for Excise & Taxation Commissioner, Haryana

Endst. No. 1471 / ST-5, Panchkula, dated the 14.07.2017

A copy along with a copy of notification is forwarded to the following for information and necessary action:-

1. All Joint Excise & Taxation Commissioner (Division/Range) in the State of Haryana.

2. All Joint Excise & Taxation Commissioners (Appeals) in the State of Haryana.

3. Senior Deputy Accountant General (Audit), Haryana, Chandigarh.

4. Dy. Excise & Taxation Commissioner (Vigilance), Haryana Vigilance Bureau, Plot No. 1, Sector-23, Panchkula.

5. PS/ACSET.

Superintendent (Sales Tax)
for Excise & Taxation Commissioner, Haryana.

Endst. No. 1471 / ST-5, Panchkula, dated the 14.07.2017

A copy along with a copy of notification is forwarded to the following in the Head Office for information and necessary action:-

1. All Addl. Excise and Taxation Commissioners

2. Jt. Excise and Taxation Commissioners

3. Jt. Director (L)-I and II

4. All the Dy. Excise and Taxation Commissioners.

5. DA-I and II

6. DDA-I & II

7. PS/PA to ETC.

8. Superintendent (C) for sending E-mail to all the DETCs(ST) and for uploading on website.

9. ST-II only (For adding in The Annual Sales Tax Circular, 2017).

Superintendent (Sales Tax)
for Excise & Taxation Commissioner, Haryana.

Excise and Taxation Department, Haryana

[Use restricted for training purpose only]

Composition Levy Scheme under Haryana GST Act, 2017

Relevant Legal Provisions:

  • Section 10 of the CGST/HGST Act, 2017 -Composition
  • Section 39 (2) of CGST/HGST Act, 2017- Furnishing of Return by Taxable Person under Composition levy.
  • GST Composition Rules (Rule 3 to 7).

Relevant Definitions: Term (Reference section)

  • Aggregate Turnover: (Section 2(6) of CGST/HGST Act, 2017)
  • Turnover in state (Section 2 (112) of CGSTMGST Act, 2017)
  • Reverse Charge (Section 2 (98) of the CGST/HGST Act, 2017)
  • Exempt Supply (Section 2 (47) of the CGST/HGST Act, 2017)
  • Non-taxable supply (Section 2 (78) of the CGST/HGST Act 2017)

Rates of Tax under Composition Scheme:

As per section 10(1) of the CGST/HGST Act, 2017, read with Rule 7 of GST Composition Rules rates under composition scheme are as under:

(i) 2% (1% CGST+1% SGST) of the turnover in the State in case of manufacturers.

(ii) 5% (2.5% CGST+2.5% SGST) of the turnover in the State in case of food/restaurant services.

(iii) 1% (0.5% CGST+0.5% SGST) of the turnover in the State in case of other suppliers (like traders/agents).

Other tax liability to be discharged:

  • Any supply of goods/services on which tax is to be paid on reverse charge basis by the recipient (Ref-Section 9(3) of the CGST/HGST Act, 2017. [Notification No. 38/ST-2, dated 30.06.2017]

For example:- 1) A lottery distributor shall have to pay tax on reverse charge basis in respect of supply of lottery by the State Government.

2) Any registered person shall have to pay tax on reverse charge basis in respect of supply of Tobacco leaves or Bidi wrapper leaves(tendu) from an agriculturist.

  • Any supply of goods/services received from unregistered supplier (Ref: Section 9(4) of the CGST/HGST Act, 2017. (Rule 5(1)(d)]

For example:- 1) Any registered person shall have to pay tax on reverse charge basis in respect of supply of Eucalyptus or Sugar Cane from an agriculturist who is not registered.

Eligibility Condition:

A registered person, whose aggregate turnover in the preceding financial year did not exceed 75 lakh rupees may opt composition scheme under section 10 (1) of CGST/HGST Act, 2017. [Govt., on the recommendation of the GST Council is empowered to raise this limit up to Rs. 1 crore].

Aggregate Turnover: total value of (Taxable supplies + exempt supplies + export of goods and services + inter-state supplies) in a Financial Year. Since Composition Taxable person cannot make inter-state supply, value of inter-state supply has to be Zero in case of such Taxable person. Further, for determination of aggregate turnover, the tax paid under GST law is not to be included.

Exempt supplies means Nil rated supplies or fully exempted supplies or non-taxable supplies.

Other Key Conditions for Availing Composition Scheme:

  • A casual taxable person or a non-resident taxable person can not opt for composition scheme; (Ref: Rule 5(1)(a) of composition Rules)
  • If migrating from existing scheme, the goods held in stock by the composition tax payer on the appointed day have not been purchased in the course of inter-State trade/ 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. (Ref. Rule 5(1)(b) of composition Rules)
  • The goods held in stock by him have not been purchased from an unregistered person and where
    purchased, he pays the tax under reverse charge mechanism. (Ref Rule 5(1)(c) of composition Rules)
  • He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply by him) (Ref: Rule 5(1)(f) of composition Rules)
  • 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 (Ref. Rule 5(1)(g) of composition Rules)
  • He is not entitled to any Input Tax Credit (Ref: Section 10(4) of the CGST/HGST Act, 2017)
  • He cannot collect any tax from the recipient on supplies made by him (Ref: Section 10(4) of the CGST/HGST Act, 2017)

Non-eligibility for Composition Scheme (Ref: Section 10 of CGST/HGST Act, 2017):

The following taxable persons are not eligible for composition levy,-

  • engaged in supplies of services other than supply of goods, being food or any other article of human consumption or any drink (other than alcoholic liquor) (Ref. Clause (b) of Paragraph 6 of Schedule 11 of CGST/HGST Act, 2017) i.e. supplies other than restaurants, caterers not eligible (Ref: Section 10(2)(a) of the CGST/HGST Act, 2017);
  • making supply of goods not leviable to GST (Ref: Section 10(2)(b) of the CGST/HGST Act, 2017);
  • making inter-state supplies of goods (Ref: Section 10(2)(c) of the CGST/HGST Act, 2017);
  • making supplies through electronic commerce operator (Ref: Section 10(2)(d) of the CGST/HGST Act, 2017).
  • being manufacturer of any notified goods (notification no. 34/ST-2, dated 06.2017) as per details under: (Ref: Section 10(2)(e) of the CGST/HGST Act, 2017).
Sr. No. Classification (Tariff item/ Chapter) Description of Goods
1. 2105 00 00 Ice cream and other edible rice, whether or not containing cocoa
2. 2106 91 20 Pan Masala
3. 24 Tobacco and manufactured tobacco substitute

Validity of Composition levy (Rule 6 of Composition Rules):

(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.

(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.

(3) The registered person who intends to withdraw from the composition scheme shall, before the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or verified through electronic verification code, electronically on the common portal.

(4) Where the proper officer has reasons to believe that the registered person was not eligible to pay tax under section 10 or has contravened the provisions of the Act or provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under section 10 shall not be denied.

(5) Upon receipt of the reply to the show cause notice issued under sub-rule (4) from the registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under section 10 from the date of the option or from the date of the event concerning such contravention, as the case may be.

(6) Every person who has furnished an intimation under sub-rule (2) or filed an application for withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under sub-rule (5), may electronically furnish at the common portal, either directly or through a Facilitation Center notified by the Commissioner, a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on which the option is withdrawn or denied, within a period of thirty days from the 4 date from which the option is withdrawn or from the date of the order passed in FORM GST CMP-07, as the case may be.

(7) Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to pay tax under section 10 in accordance with sub-rule (5) in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.

Filing of Return:

  • Return to be filed on Quarterly basis in FORM GSTR-4 (Ref: Section 39(2) of CGST/HGST Act, 2017 and Rule 62 of GST Return Rules).
  • Return to be filed by 18th day after the end of each quarter [by 18th April, 18th July, 18th oct and 18th January] (Ref: section 39 (2) of CGST/HGST Act, 2017
  • Annual Return to be filed in FORM GSTR-9A on or before the thirty-first day of December following the end of such financial year (Ref: section 44(1) of the CGST/HGST Act, 2017 and Rule 80 of GST Return Rules)
  • Fee to be paid in case of late filing of Quarterly Return ©one hundred rupees for every day subject to maximum amount of Rs. 5,000/- (Ref: Section 47 (1) of the CGST/HGST Act, 2017).
  • Fees to be paid in case of late filing of annual return @ one hundred rupees for every day subject to maximum amount calculated at 0.25% of his turnover in the State (Ref: Section 47 (2) of the CGST/HGST Act, 2017).

Issue of Bill of Supply:

  • Bill of supply to be issued instead of tax invoice (Ref: section 31(3)(c) of the CGST/HGST Act, 2017 and Rule 49 of Invoice Rules).
  • Bill of supply to carry words, namely, “composition taxable person, not eligible to collect tax on supplies” on the (Ref: Rule 5(1)(g) of GST Composition Rules).

Payment of Tax

  • Tax payable for each quarter to be paid by 18th, day from the end of quarter (Ref: Section 39(7) of the CGST/HGST Act, 2017).
  • Self-assessed tax can be paid after due date (late payment allowed up to 30 days) on payment of
  • Interest to be paid in case of late payment of self-assessed tax or short payment of tax 18%. (Ref:
    Section 50 (1) of the CGST/HGST Act, 2017).
  • Details of outward supplies and inward supplies mandated under Section 37 and 38 of the CGST/HGST Act, 2017 are required to be filed by Composition taxable person.

Offences and Penalty:

  • Not furnishing returns for three consecutive tax periods may result in cancellation of registration by proper officer (Ref: Section 29 (2) (b) of CGST/NGST Act, 2017).
  • For other penalties for non filing of returns, please refer “Filing of Return” as above.
  • Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice, result in imposition of interest along with penalty of 10% .

Offences and Penalty:

  • Not furnishing returns for three consecutive tax periods may result in cancellation of registration by proper officer (Ref: Section 29 (2) (b) of CGST/HGST Act, 2017).
  • For other penalties for non filing of returns, please refer “Filing of Return” as above.
  • Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice, result in imposition of interest along with penalty of 10% of tax amount or ten thousand rupees, whichever is higher in case of other than fraud (Ref: Section 73(11) of the CGST/HGST Act, 2017)
  • Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice, result in imposition of interest along with penalty of 50% of tax amount in case of fraud (Ref: Section74(11) of the CGST/HGST Act, 2017)

Time of Exercising of option for Availing Composition Scheme (Ref: Rule 3 of GST composition rules)

  • Option to avail scheme prior to appointed day or within 30 days from the appointed day

or

  • At the time of first

or

  • Prior to the beginning of financial year

Comparison of Composition GST levy Vs. Normal GST levy at a Glance

Subject Area

Composition Scheme Normal Scheme
Eligibility of Input Tax Credit Not eligible Eligible
Filing of Return Quarterly Monthly
Collection of taxes from buyers Not allowed to collect tax from buyers Allowed to collect tax paid or to be paid from buyers
Input Tax Credit by recipient of Supply Not allowed Allowed
Compliance Burden 5 returns to be filed in a year.

[4 quarterly returns + one annual return].

13 returns to be filed in a year.

[12 monthly returns under Section 39* + one annual return (under Section 44*).

*denotes CGST/HGST Act, 2017

Inter- State outward supplies Not allowed Allowed
Inter- State inward supplies Allowed Allowed
Supply of services Not allowed except supply of food/ drinks (other than alcoholic drinks) I.e. only restaurant, caterer service allowed. No such restriction
Document to be issued Bill of supply Tax invoice

Other important Points:

  • Government is empowered to increase the limit of Rs. 75 lakhs limit to Rs. 1 crore on the recommendation of GST Council (Ref: Proviso to Section 10 (1) of CGST/HGST Act, 2017).
  • Government is empowered to notify the goods, the manufacturer of which shall not be eligible for composition levy scheme (Ref: Proviso to Section 10 (2)(e) of CGST/HGST Act, 2017).
  • In case of establishment being in more than one State/UT, all such establishments are required to avail composition scheme or to be under normal taxpaying scheme (Ref. Proviso to Section 10 (2) of CGST/HGST Act, 2017).
  • On “aggregate turnover” exceeding Rs. 75 lakh at any day in Financial Year, the taxpayer becomes ineligible for composition levy scheme on such day and on that day on wards, the taxable person is required to pay taxes as normal tax payer GST (Ref: Section 10 (3) of CGST/ FiGST Act, 2017 read with rule 6 (2) of composition

Procedure for Opting for Composition Scheme

  • Procedure for opting for composition scheme provided in rule 3 and rule 4 of the GST Composition (discussed below)
  • The assesses can be divided into following 3 categories:

(i) Person registered under existing laws exercising the option with effect from appointed date..

(ii) Person taking new registration by filing FORM GST REG-1.

(iii) Registered person opting for composition at the beginning of financial year.

(A). Taxable Person registered (under existing law) exercising Option with effect from Appointed Date: (Ref: Rule 3(1) of GST composition Rules).

  • As per rule 3(1) of the Composition Rules, the person who has been granted registration on provisional basis and who opts to pay tax under section 10 shall electronically file intimation in form GST CMP-01 on common portal prior to the appointed day or within 30 days.

(B). Newly Registered Person (not registered under Existing law) exercising option at the time of obtaining registration (Ref: Rule 3(2) of EST composition Rules).

  • Any person who is not registered under the existing law, but intends to register either from appointed date or subsequent to that will have to make application in form GST-REG-1. He shall indicate the option of availing benefit of section 10. Such exercising of option in form GST REG-1 shall be considered as intimation to pay tax under the said section as provided in rule 3(2) of GST Composition Rules.

(C). Registered Person opting composition scheme u/s 10 after obtaining registration (Ref: Rule 3(3) of GST Composition Rules).

  • Any other registered person who wants to opt for payment of tax under section 10 shall electronically file intimation in FORM GST CMP-02 duly signed in common portal prior to commencement of the financial year for which the option to pay tax under section is exercised.

[The term “existing law” has been defined under Section 2(48) of the CGST/HGST Act, 2017)

presentation of composition scheme under GST in pictorial form

GST Composition Formats

Excise and Taxation Department, Haryana

GOODS AND SERVICES TAX

FREQUENTLY ASKED QUESTIONS ON COMPOSITION LEVY UNDER GST

Q 1. What is the composition levy under GST Act?

Ans. The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 Lakh (Rs. 50 Lakh in case special category States). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.

[Section 10 of CGST/HGST 2017]

Q 2. What is the specified rate of composition levy?

Sr. No . Category of Registered person Rate of tax
1. Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobacco products etc.) 2% (1% Central tax plus 1% State tax) of the turnover
2. Restaurant Services 5% (2.5% Central tax plus 2.5% State Tax) of the turnover
3. Traders or any other supplier eligible for composition levy 1% (0.5% Central tax plus 0.5% State Tax) of the turnover

[Section 10(1) of CGST/HGST 2017, Rule 7 of CGST/HGST Rules 2017]

Q 3. What is the eligibility category for opting for composition levy? Which are the Special Category States in which the turnover limit for Composition Levy for Central tax and State tax purpose shall be Rs. 50 Lakh?

Ans. Composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross Rs.75 Lakh. In the case of following States, limit of turnover is Rs. 50 Lakh:-

a) Arunachal Pradesh

b) Assam

c) Manipur

d) Meghalaya

e) Mizoram

f) Nagaland

g) Sikkim

h) Tripura

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i) Himachal Pradesh

[Section 10(1) of CGST/HGST 2017]

Q 4. Who are the persons not eligible for composition scheme ?

Ans. Following persons are not allowed to opt for the composition scheme

a) a casual taxable person or non-resident person.

b) suppliers whose aggregate turnover in the preceding financial year crossed Rs. 75 lakh

c) supplier who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis;

d) supplier of services, other than restaurant service;

e) persons supplying goods which are not taxable under GST law;

f) suppliers making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52 and;

g) a manufacturer of following goods:

Sr. No. Classification (Tariff item/ Chapter) Description of Goods
1. 2105 00 00 Ice cream and other edible rice, whether or not containing cocoa
2. 2106 91 20 Pan Masala
3. 24 Tobacco and manufactured tobacco substitute

[Section 10(2) read with Rule 5 of CGST/HGST Act, Notification 34/ST-2, date 30.06.2017]

Q 5. When will a person opting for composition levy pay tax?

Ans. A person opting for composition levy will have to pay tax on quarterly basis before 18th of the month succeeding the quarter during which the supplies were made.

[Rule 62 of CGST/HGST Rules, 2017]

Q 6. A person availing composition scheme during a financial year crosses the turnover of Rs. 75 lakh/50 lath during the course of the year i.e. say he crosses the turnover of  Rs. 75 lakh/50 lakh in December? Will he be allowed to pay tax under composition scheme for the remainder of the year i.e. till 31st March?

Ans. No. The option to pay tax under composition scheme lapses from the day on which his aggregate turnover during the financial year exceeds the specified limit (Rs. 75 lakh/Rs. 50 lakh). He is required to file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days from the day on which the threshold limit has been crossed.

However, such person shall be allowed to avail the input tax credit in respect of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him and on capital goods held by him on the date of withdrawal and furnish a statement within 30 days of withdrawal containing the details of such stock held, in FORM GST ITC-01 on the common portal.

[Section 10(3) of CGST/HGST Act, 2017]

Q 7. How will the aggregate turnover be computed for the purpose of composition?

Ans. Aggregate turnover will be computed on the basis of turnover on an all-India basis and will include value of all taxable supplies, exempt supplies and exports made by all persons with same PAN, but would exclude inward supplies under reverse charge as well as Central, State/Union Territory and Integrated taxes and cess.

[Section 2(6) of CGST/HGST Act, 2017]

Q 8. Can a person who has opted to pay tax under the composition scheme avail input Tax Credit on his inward supplies?

Ans. No. A taxable person opting to pay tax under the composition scheme is out of the credit chain. He can not take credit on his input supplies. When he switches over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed (refer Q 6 above).

Q 9. Can a registered person, who purchases goods from a taxable person paying tax under the composition scheme, avail credit of tax paid on purchases made from the composition dealer?

Ans. No. As the composition dealer can not collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme can not avail credit.

Q 10. Can a person paying tax under the composition scheme issue a tax invoice under GST?

Ans. No. He can issue a bill of supply in lieu of tax invoice.

/Q 11. Are monthly returns required to be filed by the person opting to pay tax under the composition scheme?

Ans. Such persons need to electronically file quarterly returns in Form GSTR-4 on the GSTN common portal by the 18th of the month succeeding the quarter. For example, return in respect of supplies made during July, 2017 to September, 2017 is required to be filed by 18″ October 2017.

[Rule 62 of CGST/HGST Rule 2017]

Q 12. What is the basic information that needs to be furnished in GSTR-4?

Ans. It would contain details of the turnover in the State or Union Territory, inward supplies of goods or services or both and tax payable.

Q 13. A person opting to pay tax under the composition scheme receives input/input services from an unregistered person. Will the composition taxpayer have to pay GST under reverse charge? If yes, in what manner?

Ans. Yes. Tax will have to be paid on such supplies by the composition taxpayer under reverse charge mechanism. The tax can be paid by the 18″ day of the month succeeding the quarter in which such supplies were received. The information relating to such supplies should be shown by the composition taxpayer in Table 4 of return in FORM GSTR 4.

[Rule 62(3) of CGST/HGST Rule 2017]

Q 14. What is the form in which an intimation for payment of tax under composition scheme needs to be made by the taxable person?

Ans. The intimation is to be filed electronically in FORM GST CMP-01 or FORM GST CMP-02.

Q 15. A person registered under existing law (Central Excise/Service Tax/VAT) and who has been granted registration on a provisional basis wants to opt for composition scheme. How and when can he do that?

Ans. Such a person has to electronically file a duly signed/verified intimation in FORM GST CMP-01, on the common portal, prior to 22nd June, 2017 or such further period as may be allowed by the Commissioner.

Q 16. What are the other compliances which a provisionally registered person opting to pay tax under the composition levy need to make?

Ans. Such person is required to furnish the details of stock, including the inward supply of goods received from unregistered person, held by him on the day preceding the date from which he opts to pay tax under the composition scheme, electronically, in FORM GST CMP-03, on the common portal either directly or through a Facilitation Center notified by the Commissioner, within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.

Q 17. Can a person making application for fresh registration under GST opt for composition levy at the time of making application for registration?

Ans. Yes. Such person can give the option to pay tax under the composition scheme in Part B of FORM GST REG-01. This will be considered as an intimation to pay tax under the composition scheme.

Q 18. Can the option to pay tax under composition levy be exercised at any time of the year?

Ans. No. The option is required to be given electronically in FORM GST CMP-02, prior to the commencement of the relevant financial year.

Q19. Can a person who has already obtained registration, opt for payment under composition levy? If so, how?

Ans. Yes. Such persons need to give intimation electronically in Form GST CMF-02 but it will be effective from beginning of the financial year only.

Q 20. What are the compliances from ITC reversal point of view that need to be made by a person opting for composition levy?

Ans. The registered person opting to pay tax under composition scheme is required to pay an amount equal to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of exercise of option. The ITC on inputs shall be calculated proportionately on the basis of corresponding invoices on which credit had been availed by the registered taxable person on such inputs.

In respect of capital goods held in stock on the day immediately preceding the date of exercise of option, the input tax credit involved in the remaining useful life in months shall be computed on pro-rate basis, taking the useful life as 5 years. Assume capital goods have been in use for 4 years, 6 months and 15 days. The useful remaining life in months will be 5 months ignoring the part of the month, If ITC on such capital goods is taken as C, ITC attributable to the remaining useful life will be C multiplied by 5/60. This would be the amount payable on capital goods.

The ITC amount shall he determined separately for integrated tax, central tax and state tax/union territory tax. The payment can be made by debiting electronic credit ledger, if there is sufficient balance in said ledger, or by debiting electronic cash ledger. The balance, if any in the electronic credit ledger would lapse. Such person also have to furnish the statement in FORM GS l ITC-03 which is a declaration for intimation of ITC reversal/payment of tax on inputs held in stock, inputs contained in semifinished and finished goods held in stock and capital goods under section 18(4) of the CGST/HGST Act, 2017 within a period of sixty days from the commencement of the relevant financial year.

Q 21. In case a person has registration in multiple states, can he opt for payment of tax under composition levy only in one state and not in other state?

Ans. The option to pay tax under composition scheme will have to be exercised for all States.

Q 22. What is the effective date of composition levy?

There can be three situations:

Situation Effective date of composition levy
Persons who have been granted provisional registration and who opt for composition levy (Intimation under Rule 3(1)). The appointed date is 22nd June, 2017
Persons opting for composition levy at the time of making application for new (registration in the same registration application itself (Intimation under Rule 3(2)). Effective date of registration; intimation shall be considered only after the grant of registration and his option to pay tax under section 10 shall be effective from the effective date of registration.
Persons opting for composition after obtaining registration (Intimation under Rule 3(3)). The beginning of the financial year.

Q 23. What are the other conditions and restrictions subject to which a person is allowed to avail of composition scheme?

Ans. The person exercising the option to pay tax under section 10 shall comply with the following other conditions (in addition to what is stated in answer to Q 4 above), namely:-

a) 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;

b) 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

Q 24. What is the validity of composition levy?

Ans. The option to pay tax under composition levy would remain valid so long as conditions mentioned in section 10 of the CGST/HGST Act, 2017 and Rule 3 to 5 of the CGST/HGST Rules, 2017 remain satisfied.

Q 25. Can a person paying tax under composition levy, withdraw voluntarily from the scheme? If so, how?

Ans. Yes. The registered person who intends to withdraw from the composition scheme can file a duly signed or verified application in FORM GST CMP-04.

Every person who has filed an application for withdrawal from the composition scheme, may electronically furnish, a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date of withdrawal, within a period of thirty days or withdrawal.

Q 26. What action can be taken by the proper officer for contravention of any provisions of composition levy and how?

Ans. Where any contravention is observed by the proper officer wherein the registered person was not eligible to pay tax under the composition scheme or has contravened the provisions of the CGST/HGST Act, 2017 or provisions of Chapter II of the CGST/HGST Rules, 2017, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under the composition scheme shall not be denied.

Upon receipt of the reply to the said show cause notice in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under the composition scheme from the date of the option or from the date of the event concerning such contravention, as the case may be.

Q 27. In case the option to pay tax under composition levy is denied by the proper officer, can the person avail ITC on stock after denial?

Ans. Yes, ITC can be availed by filing a statement in FORM GST ITC-01 (containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock) by him on the date on which the option is denied as per order in FORM GST CMP-07, within a period of thirty days from the order.

Q 28. Will withdrawal intimation in any one place be applicable to all places of business?

Yes. Any intimation or application for withdrawal in respect of any place of business in any State or Union Territory shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.

Q 29. Can supplier of services opt for composition levy?

No, the only exception being supplier of restaurant services.

Q 30. What are the penal provision if a person opts for the composition scheme in violation of the conditions?

Ans. If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for determination of tax and penalty.

Q 31. Can a person paying tax under composition scheme make supplies of goods to SEZ?

Ans. No. Supplies to SEZ from domestic tariff area will be treated as inter-State supply. A person paying tax under composition scheme can not make inter-State outward supply of goods. Thus, for making supplies to an SEZ unit, d person needs to take registration as a regular taxpayer. The supplies to SEZ will be zero rated and the supplier will be entitled to make supplies without payment of tax or if he pays tax, he will be entitled to refund of tax so paid.

Q 32. A registered person has excess ITC of Rs. 10,000/- in his last VAT return for the period immediately preceding the appointed day. Under GST, he opts for composition scheme. Can he carry forward the aforesaid excess ITC to GST?

Ans. The registered person will not be able to carry forward the excess ITC of VAT to GST, if he opts for composition scheme,

Q 33. Must a composition dealer maintain detailed records?

Ans. No, a dealer registered under composition scheme is not required to maintain detailed records as in the case of a normal taxpayer.

Q 34. Is liability to pay taxes under the Reverse Charge Mechanism covered under the Composite Scheme?

Ans. Any tax payable under Reverse Charge Mechanism will not be covered under the scheme. These taxes will be liable to be paid as a normal taxpayer.

Q 35. Do tax payers under the composition scheme also need to file GSTR-1 and GSTR-2?

Ans. No. Composition tax payers do not need to file any statement of outward or inward supplies. They have to file a quarterly return in Form GSTR-4 by the 18th of the month after the end of the quarter. Since they are not eligible for any input tax credit, there is no relevance of GSTR-2 for them and since the credit of tax paid under Composition Levy is not eligible, there is no relevance of GSTR-1 for them. In their return, they have to declare summary details of their outward supplies along with the details of tax payment. They also have to give details of their purchases in their quarterly return itself, most of which will be auto-populated.

Q 36. Can composition scheme be availed of by a manufacturer?

Ans. Yes. Manufacturer can opt for composition scheme but turnover should not be more than Rs. 75 Lakh (Rs. 50 Lakh in case special category States). Tax shall be paid @ 2% on the turnover in the State.

Q 37. What is the scope of composition scheme under GST?

Ans. Small taxpayers with an aggregate turnover in a preceding financial year up to Rs. 75 Lakh shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover in a state during the year without the benefit of ITC. A taxpayer opting for composition levy shall not collect any tax from his customers.

Q 38. Whether the composition scheme will be optional or compulsory?

Ans. The composition scheme is optional and not compulsory.

Q 39. What returns are to be filed by registered person who has opted composition scheme?

Ans. A registered person under composition scheme have to file quarterly returns in FORM GSTR-4 by the 18th day after the end of each quarter. He has to file annual return in the FORM GSTR-9A.

[section 39(2), of the CGST/HGST Act, 2017 and CGST/HGST Rules 2017]

Q40. What is the due date of filing of annual return in case of composition scheme?

Ans. On or before the thirty first day of December following the end of such financial year.

[section 44(1) of the CGST/HGST Act, 2017 and CGST/HGST Rules 2017]

Q 41. Can composition tax be collected from the customers?

Ans. No. The registered person under composition scheme is not permitted to collect tax. It means that a composition scheme supplier can issue a tax invoice.

Q 42. Can composition scheme be availed of by a service supplier?

The composition scheme is not available for services sector, except restaurants.

Q 43. Do registered persons under composition scheme need to fie a fresh intimation every year for composition?

Ans. No. The registered person paying tax under composition scheme need not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and the rules framed there under.

Q 44. Can a person opting for composition scheme procure goods from inter-state supplier?

Ans. Yes, a person opting for composition scheme can procure goods from inter-state supplier and there is no restriction on any inward supply.

Q 45. What is the fees/penalty to be paid in ease of late filing of annual return under composition scheme?

Ans. Fees to be paid in case of late filing of annual return @ one hundred rupees for every day subject to maximum -amount calculated at 0.25% of his turnover in the State.

(Ref: Section 47 (2) of the CGST/HGST Act, 2017)

Q 46. Can registered person under composition scheme make an inward supply from the other state?

Ans. Yes, a dealer under composition scheme is allowed to make en inward inter-state supply from the other state. However, outward supplies to the other state are not allowed to the dealer under composition scheme.

Q 47. Is any notice required by a proper officer for denial of option to pay tax under composition scheme?

Ans. Yes. Where the proper officer has reasons to believe that the registered person was not eligible to pay tax under composition scheme or has contravened the provisions of the Act or provisions of Chapter-II, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under composition scheme, shall not be denied.

(Ref: Rule 6 (4) of the CGST/HGST Rule, 2017)

Q 48. Is any order required by a proper officer for denial of option to pay tax under composition scheme?

Ans. Yes. Upon receipt of the reply to the show cause notice issued under rule 6(4) from the registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under composition scheme from the date of the option or from the date of the event concerning such contravention, as the case may be.

(Ref Rule 6 (5) of the CGST/HGST Rule, 2017)

Q 49. I am a manufacturer of Ice cream and my turnover is Rs.40 Lakh per year. Can I opt composition scheme under GST?

Ans. No, Manufacturer of Ice cream and Tobacco products are not allowed to opt for composition scheme.

Q50. I am a trader of footwear and my daily sale is between Rs.6000 to 7000. Can I opt composition scheme under GST?

Ans. Yes. Your annual turnover is approximately Rs. 25 Lakh. You can opt for composition scheme which is limited to turnover of Rs. 75 Lakh in a year and you can pay tax @ 1% on this turnover.

DIRECTIVES FOR MIGRATION

The provisions of GST law require that all the persons registered under any of the previous taxing statutes, which have been subsumed under GST, (hereinafter referred to as previously registered persons) are liable for registration under GST as well. This process of migration is required to be completed by following a simpler method than registration for new taxable person. See Section 22(2) of the State GST and the CGST.

Though the process of migration commenced in the month of December, 2016, still a lot of ground is yet to be covered for completing the task of migrating all the previously registered persons into the GST. Hence the guidelines.

The process of Migration consists of following steps:

Step 1. 0n receipt of provisional Id and password, the taxpayer has to login with this Id and password.

Step 2. Process of enrollment: The taxpayer has to feed in his mobile No and a valid email id of the authorized signatory of the business entity. This Mobile No. And email id shall be validated by the system. On validation, taxpayer will create his username and password for further processing.

Step 3. Taxpayer will have to upload an application in form of REG-26 and scanned images of specified documents duly signed by DSC or verified through electronic verification code within a period of three months from enrollment

Step 4 Excise & Taxation Officer has to verify the application in form REG-26 within 15 days. In case the deficiency is detected, an online Show Cause Notice in the form of REG-27 can be issued within 15 days. If no action is taken within this prescribed time, the application shall be deemed verified.

Step 5. Registration Certificate in the form of REG-06 duly signed by the officer shall be made available to the applicant and the process of migration shall be completed.

1. Migration of erstwhile Haryana VAT dealers

The first essential requirement for previously registered taxable persons is to have a PAN as validated from CBDT data. Of all the registered persons under Haryana VAT as on the date preceding the appointed day under GST, PANs of total of 255408 persons have been validated. Provisions ID and password for all these persons have been received and forwarded. Out of 255408 persons, so far 206553 persons have logged in and completed the process of enrollment (as mentioned at Step 2 above) as on 11th July, 2017.

Out of the successfully enrolled persons numbering 206553, 163039 persons have so far submitted an application electronically in the form of GST REG-26 duly signed or verified through electronic verification code. The Proper Officer is required to verify the application submitted by these persons in the form of GST REG-26 within a period of 15 days. If any deficiency is taken note of by the Proper Officer, a show cause notice in the form of GST REG-27 can be issued within 15 days of submission of the application. If the Proper Officer fails to verify these applications within period of 15 days from the date of furnishing of information, the registration shall be deemed to have been granted. In case any tax evasion or non-compliance of the GST law is detected, the follow up action may he initiated immediately as per the provisions of the GST law. On an average 780 applications in the form of REG-26 are required to be verified by each ETO. Therefore, all the ETOs are required to start verifying the electronic application of the persons submitted in the form of REG-26 expeditiously. [See Rule 24 of Haryana/Central Goods and Services Tax, Rules, 2017]. A weekly report on the progress made be also forwarded to the Head Office or will be uploaded on the portal of Information Exchange whenever it is developed and live. [Action point Proper Officer]

As slated above, 206553 have successfully enrolled themselves and 163039 have submitted their application in form of REG-26. So, remaining 43514 persons have so far not submitted their applications in the form of GST REG-26 duly signed and verified. Though the law provides for period of 3 months to successfully enrolled persons to submit their REG-26 duly signed and verified, see Rule 24(2)(h). However, ETO may start contacting and facilitating such persons to furnish this information expeditiously.

2. Migration of Erstwhile VAT dealers having turnover more than 20 Lac but not enrolled to CST

As stated above, 43514 previously registered persons having valid PAN have not so far enrolled themselves. Out of these persons, 11880 previously registered persons had turnover of more than 20 Lakh in 2016-17. A ward-wise list of these persons is being forwarded to each district. The ETO of each ward is required to sequence the list pertaining to his ward in the descending order of turnover of 2016-17 and, should start verification in each case in the order of turnover. ETO in respect of each ward is required to conduct verification as to why they have failed to enroll themselves. The verification may include the Ibl lowing points:-

1) Any particular reason for non-enrollment stated by the person.

2) Whether the firm is functional, if yes, the firm liable to pay tax under GST.

3) Whether the firm has any stock of taxable goods.

4) Whether the firm has discharged its liability of furnishing returns and payment of tax under VAT.

5) Whether the firm is conducting business in accordance with the GST provisions by charging and issuing proper tax invoices under GST.

6) Any other relevant matter or inquiry deemed fit.

The process of verification must be completed in a week’s time and a report to this effect is to be sent in the prescribed format. The format is attached herewith [Action point Proper Officer/DETCI].

The target is to get these persons enroll themselves and submit their information in REG-26 within July, so that the crowding of the system does not take place when the filing of returns under GST commences in September.

3. Data of Migrated Erstwhile Service Taxpayers.

Goods and Services Tax provides for levy of tax on supply of goods or services or both. Erstwhile registered taxable persons paying tax under service tax arc also required to get themselves migrated to GST. Though process of migration of these taxpayers is being looked after by CBEC, these taxpayers will be distributed among st various wards like erstwhile VAT dealers. Excise & Taxation Officer have jurisdiction over such taxpayers falling in his ward just like VAT dealers. Thus each ward officer should monitor taxpayers predominantly engaged in supply of services falling in his ward. Excise & Taxation Officers are further called upon to engage with their counterparts in CBEC and other officers for better understanding of the subject.

Ward-wise Report of the dealers registered under the VAT but not enrolled under GST

District

Ward

S N Name of the Person/ Dealer TIN (as per VAT) GTO for the year 2016- 17 Date of Visit to Person/ Dealer Whether Functional or closed ( F n C) Whether  Taxable Stock under GST available (Yes or No) Whether  return for Q4 for 2016- 17 submitted (Yes/ No) Remarks/ Action taken for facilitation
1
2
3

Note: The points enumerated in the guidelines if not separately provided in the columns may be summarized under the column of remarks.

Name of the ETO

Signature of the officer

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Category : Goods and Services Tax (4855)
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