Introduction
The Goods and Services Tax (GST) in India offers a simplified tax compliance option known as the Composition Scheme, designed for small taxpayers to ease their tax burden and compliance requirements. However, certain categories of businesses and manufacturers are restricted from opting for this scheme. A crucial aspect of this restriction applies to manufacturers of specific goods, including bricks and similar siliceous earths. This article delves into the legal provisions governing the eligibility of brick manufacturers under the GST Composition Scheme.
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Background: Composition Scheme under GST
The Composition Scheme under Section 10 of the CGST Act, 2017, allows small taxpayers with an aggregate turnover up to a specified limit to pay tax at a lower rate and comply with fewer procedural requirements. The scheme aims to benefit businesses by reducing their tax-related burden.
Under Section 10(1) of the CGST Act 2017, a registered person whose turnover in the preceding financial year did not exceed ₹1.5 crore (as per Notification No. 14/2019 – CT dated 7th March 2019) may opt for the scheme, subject to prescribed conditions and restrictions. The tax rate applicable under this scheme varies based on the nature of the business:
- Manufacturers – 1% of turnover in the State/Union Territory.
- Persons engaged in specific supplies – 2.5% of turnover.
- Other suppliers – 0.5% of turnover.
Restriction on Brick Manufacturers
As per Section 10(2) (e) of the CGST Act, 2017, a taxpayer shall not be eligible for the Composition Scheme under Section 10(1) if engaged in the manufacturing of goods that the Government notifies as ineligible.
Notification No. 14/2019 – CT, dated 7th March 2019, explicitly restricts the manufacturers of certain goods from opting for the Composition Scheme. The relevant entries from the notification include:
| SI. NO. | Tariff Heading | Description |
| 4 | 6815 | Fly ash bricks, Fly ash aggregates, Fly ash blocks |
| 5 | 69010010 | Bricks of fossil meals or similar siliceous earths |
| 6 | 69041000 | Building bricks |
| 7 | 69051000 | Earthen or roofing tiles |
Since, brick manufacturers fall under these tariff headings, they cannot opt for the Composition Scheme under Section 10(1) of the CGST Act.
Alternative Composition Scheme under Section 10(2A)
To address the ineligibility concerns of certain manufacturers, Section 10(2A) of the CGST Act, 2017 was inserted by the Finance (No. 2) Act, 2019, effective from 1st January 2020, through Notification No. 01/2020-Central Tax dated 01.01.2020. This provision provides a special composition scheme for taxpayers whose turnover does not exceed ₹50 lakh in the preceding financial year.
Under this scheme, a registered person not eligible under Section 10(1) can still opt for a composition-like scheme, provided they fulfill the following conditions:
1. The aggregate turnover in the preceding financial year does not exceed ₹50 lakh.
2. The taxpayer does not engage in:
-
- Supply of goods or services not liable to GST;
- Inter-state supplies;
- Supplies through an e-commerce operator that collects tax at source under Section 52;
- Manufacture of goods notified as ineligible u/s 10(2A)(d) of the CGST Act, 2017;
- A Casual taxable person or NRTP.
Crucially, till date, no goods have been notified as ineligible under Section 10(2A) (d) of the CGST Act, 2017. This means that the manufacturers of fly ash bricks, building bricks, and similar siliceous earths can opt for the Composition Scheme under Section 10(2A), subject to fulfilling the turnover and other conditions.
Clarification on Notification No. 2/2019 – CTR dated 07th March, 2019
Another relevant notification, Notification No. 2/2019 – CTR, dated 7th March 2019 was issued before insertion of sub-section 2A of Section 10 of the CGST Act, 2017 which prescribed a 6% composition tax rate for small service providers with a turnover up to ₹50 lakh.
One of the condition mentioned in the said notification that supplier is not engaged in making supplies of the goods, the description of which is specified in column (3) of the Annexure below and falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said annexure.
The extract of the annexure is as under:
| Sl. No. | Tariff item, sub-heading, heading or Chapter | Description |
| (1) | (2) | (3) |
| 1 | 2105 00 00 | Ice cream and other edible ice, whether or not containing cocoa. |
| 2 | 2106 90 20 | Pan masala |
| 2A | 2202 10 10 | Aerated Water |
| 3 | 24 | All goods, i.e. Tobacco and manufactured tobacco substitutes |
Therefore, this notification does not include brick manufacturers in its restriction list, further confirming that they are not prohibited from opting for the alternative Composition Scheme under Section 10(2A) of the CGST Act, 2017.
Conclusion
- Brick manufacturers are not eligible to opt for the standard Composition Scheme under Section 10(1) due to explicit restrictions in Notification No. 14/2019 – CT.
- However, they can avail the alternative Composition Scheme under Section 10(2A), provided they meet the turnover and other specified conditions.
- As no goods or services have been notified under Section 10(2A) (d), manufacturers of fly ash bricks, building bricks, and similar siliceous earths are eligible to opt for the scheme.
This legal clarity ensures that small-scale manufacturers in the brick industry can still benefit from simplified tax compliance and a reduced tax rate under GST.
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