CA Pankaj Kumar Rathore

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Section 9 – “Composition Levy”

Meaning:

Composition levy” means taxable person have to pay tax at concessional rate instead of paying at full rate of the turnover during the year.

Features of Scheme:

  • A registered taxable person can opt for the composition scheme only if his aggregate turnover in the preceding financial year did not exceed Fifty Lakh Rupees (i.e. upto Fifty Lakh)
  • Concessional rate would not be less than two and a half percent in case of a manufacturer and one percent in any other cases
  • No relaxation to composition scheme dealers on reverse charge mechanism provisions. These dealers are also liable to pay tax on reverse charge on specific category of goods and/or services.
  • Benefit of scheme can be availed only upto the turnover of Rupees Fifty Lakh during the year, in case it exceeds Fifty Lakh
  • Taxable person shall not collect any tax from the recipient of supplies made by him
  • Taxable person shall not be entitled to claim any credit of input tax on the supplies received.
Provisions applicable to “Composition Scheme Dealers” under GST

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Composition scheme cannot be opted by following dealers:

  • who is engaged in supply of services
  • who makes any supply of goods which are not leviable tax under the Act
  • who makes any inter-state outward supplies of goods
  • who makes supply of goods through an electronic commerce operator who is required to collect tax at source
  • who is manufacturer of such goods as may be notified on the recommendation of the Council.

Further, if more than one registration has been taken under the same PAN, all registered taxable persons shall opt to pay tax under this scheme (i.e. registration taken under the same PAN will have to opt for this scheme) to avail benefit of this scheme otherwise they would be out of this scheme and other provisions of the Act applicable.

Hope this is useful for you.

Relevant Extract of Section 9 of Revised Model Draft GST Law

9. Composition Levy

(1) Notwithstanding anything to the contrary contained in the Act but subject to sub­section (3) of section 8, on the recommendation of the Council, the proper officer of the Central or a State Government may, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than two and a half percent in case of a manufacturer and one percent in any other case, of the turnover in a State during the year:

PROVIDED that no such permission shall be granted to a taxable person‑

(a) who is engaged in the supply of services; or

(b) who makes any supply of goods which are not leviable to tax under this Act; or

(c) who makes any inter-State outward supplies of goods; or

(d) who makes any supply of goods through an electronic commerce operator who is required to collect tax at source under section 56; or

(e) who is a manufacturer of such goods as may be notified on the recommendation of the Council:

PROVIDED FURTHER that no such permission shall be granted to a taxable person unless all the registered taxable persons, having the same PAN as held by the said taxable person, also opt to pay tax under the provisions of this sub-section.

(2)   The permission granted to a registered taxable person under sub-section (1) shall stand withdrawn from the day on which his aggregate turnover during a financial year exceeds fifty lakh rupees.

(3)   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.

(4) If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under sub-section (1), such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty and the provisions of section 66 or 67, as the case may be, shall apply mutatis mutandis for determination of tax and penalty.

(If you have any query, you can contact me at 9313215231 and mail id capankaj97@gmail.com)

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Category : Goods and Services Tax (6864)
Type : Articles (16992)
Tags : goods and services tax (5352) GST (4955)

2 responses to “Provisions applicable to “Composition Scheme Dealers” under GST”

  1. Ritesh says:

    Do an composition scheme dealer need to deposit reverse charges amount if he receives goods from unregistered dealer in GST concept.

  2. Ritesh says:

    Do an registered dealer need to deposit reverse charge if he receives goods from composition scheme dealer. In GST concept.

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