MEANING

A registered person whose aggregate turnover in the preceding financial year did not exceed seventy five lakh rupees may opt to pay, in lieu tax at the normal rates, tax at such rate as prescribed under composition levy

TURNOVER LIMIT

The GST Council, in its meeting held on 11th June, 2017, had recommended increase in the turnover limit for Composition Levy for CGST and SGST purposes from Rs.50 lakh to Rs.75 lakh for all eligible registered persons. However, no clear view was taken as to whether or not this increased turnover limit will apply in case of Special Category States

In its meeting held on 18th June, 2017, the GST Council has recommended that the turnover limit for Composition Levy for CGST and SGST purposes shall be Rs.50 lakh in respect of the following Special Category States namely:

  1. Arunachal Pradesh,
  2. Assam,
  3. Manipur,
  4. Meghalaya,
  5. Mizoram,
  6. Nagaland,
  7. Sikkim,
  8. Tripura, and
  9. Himachal Pradesh.

The Council has also recommended that in case of Uttarakhand, the turnover limit for Composition Levy for CGST and SGST purposes will be Rs.75 lakh.

For the State of Jammu & Kashmir the turnover limit for the Composition levy will be decided in due course.

 ELIGIBILITY UNDER COMPOSITION SCHEME:

The registered person shall be eligible for composition levy if:—

 (a) he is engaged in the supply of goods having turnover below 75 lakhs in the preceding  financial year or person engaged in food supplies or any other article for human consumption or any drink (other than alcoholic  liquor for human consumption).

 (b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;

(c) he is not engaged in making any inter-State outward supplies of goods;

 (d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and

 (e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council.

INELIGIBILITY UNDER COMPOSITOIN SCHEME:

  • If same PAN is issued to more than one registered person, the registered person shall not be eligible for composition levy unless all such person agreed to pay tax under it.
  • The eligibility to pay tax under Composition Scheme for the registered person shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds 75 lakhs.

NO INPUT TAX CREDIT UNDER COMPOSITION SCHEME:

The registered person paying tax under composition scheme shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

NO CESS UNDER COMPOSITION SCHEME:

Provided that no such cess shall be leviable on supplies made by a taxable person who has decided to opt for composition levy under section 10 of the Central Goods and Services Tax Act.

RATE OF TAX UNDER COMPOSITION LEVY:

S.NO

NATURE OF ACTIVITY OF SUPPLIER

RATE OF TAX

1.

Manufacturers

One per cent

2.

registered person engaged in any supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration

Two and a half per cent

3.

Other Suppliers

Half per cent

INTIMATION UNDER COMPOSITION SCHEME:

FORM GST CMP-01- Every person, other than a person deducting tax at source or an Input Service Distributor, registered under an existing law and having a PAN issued under the Income-tax Act, 1961 and who opts to pay tax under section 10, shall electronically file an intimation in FORM GST CMP-01. prior to the appointed day, but not later than thirty days after the said day, or such further period as may be extended by the Commissioner in this behalf.

FORM GST CMP-02- Any registered person who opts to pay tax under section 10 shall electronically file an intimation in FORM GST CMP-02 prior to the commencement of the financial year for which the option to pay tax under the aforesaid section is exercised and shall furnish the statement in FORM GST ITC-3 within sixty days from the commencement of the relevant financial year.

FORM GST CMP-03- Any person who files an intimation under sub-rule (1) to pay tax under section 10 shall furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts to pay tax under the said section, electronically, in FORM GST CMP-03 within sixty days of the date from which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.

Effective date for composition levy:

  • (i) The option to pay tax under composition levy shall be effective from the beginning of the financial year, where the intimation is filed by a registered person and the appointed date where intimation is filed by a migrated person registered under existing law.
  • (ii) The intimation to opt the composition levy shall be considered only after grant of registration to the applicant.

 

CONDITIONS AND RESTRICTIONS FOR COMPOSITION LEVY:

(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions: (a) he is neither a casual taxable person nor a non-resident taxable person;

 (b) the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or 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, where the option is exercised by a migrated person from the existing law;

 (c) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax on reverse charge basis as the recipient;

 (d) he shall pay tax on reverse charge basis on inward supply of goods or services or both;

(e) he was not engaged in the manufacture of goods as notified by the Government on the recommendation of the Council, during the preceding financial year;

 (f) 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; and

(g) 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 business.

 (2) The registered person paying tax under section 10 may 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 these rules.

VALIDITY OF COMPOSITION LEVY:

  • The option exercised by a registered person to pay tax under Composition Levy shall remain valid so long as he satisfies all the conditions mentioned above.
  • The registered person who ceases to satisfy any of the conditions to avail composition scheme shall be liable to pay tax under the normal rate 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 , duly signed or verified through EVC, electronically on the Common Portal within seven days of occurrence of such event.
  • 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 these rules, 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 option to pay tax under Composition Scheme should not be denied.
  • Upon receipt of reply to the show cause notice from the registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within thirty days of receipt of such reply, either accepting the reply, or denying the option to pay tax under Composition Schemefrom the date of option or from the date of the event concerning such contravention, as the case may be.
  • Every person who has furnished an intimation of withdrawal or filed an application for withdrawal or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07, may electronically furnish at the Common Portal, either directly or through a Facilitation Centre 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 30 days, from the date from which the option is withdrawn or from the date of order passed in FORM GST CMP-07, as the case may be.
  • Any intimation or application for withdrawal or denial of the option to pay tax under Composition Scheme 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 PAN.

Manufacturers of goods who will not be eligible for Composition Levy:

S. No.              

Classification (Tariff item / Chapter)

Description

1

2105 00 00                                                    

Ice cream and other edible ice, whether or not containing cocoa.

2

2106 90 20

Pan masala

3

24

Tobacco and manufactured tobacco substitutes

 

Composition Scheme Formats:

S.No.

             Form No.

                                     Description

1.

GST CMP-01

Intimation to pay tax under section 10 (composition levy) (Only for persons registered under the existing law migrating on the appointed day)

2.

GST CMP-02

Intimation to pay tax under section 10 (composition levy) (For persons registered under the Act)

3.

GST CMP-03

Intimation of details of stock on date of opting for composition levy (Only for persons registered under the existing law migrating on the appointed day)

4.

GST CMP-04

Intimation/Application for withdrawal from composition Levy

5.

GST CMP-05

Notice for denial of option to pay tax under section 10

6.

GST CMP-06

Reply to the notice to show cause

7.

GST CMP-07

Order for acceptance / rejection of reply to show cause notice

 

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