All About Composition Scheme under GST (Section 10)

#1. What is composition levy under GST?

Ans. The  composition levy is an alternative method of levy of GST designed for small taxpayers whose turnover is up to Rs. 1.5 Crore ( Rs. 75 lakhs in case of few States*) in preceding financial year.

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.

*few States- (i) Arunachal Pradesh, (ii) Manipur, (iii) Meghalaya, (iv) Mizoram, (v) Nagaland, (vi) Sikkim, (vii) Tripura, (viii) Uttarakhand.
 

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

Ans:

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#3. Who are the persons not eligible for composition scheme under GST?

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

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

b)  Suppliers whose aggregate turnover in the preceding financial year crossed Rs. 1.5 Crore ;

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) Persons making any inter-State outward supplies of goods;

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

h) a manufacturer of following goods:

> Chapter 2105 00 00 : Ice cream and other edible ice, whether or not containing cocoa.

> Chapter 2106 90 20 : Pan masala

> Chapter 24 : Tobacco and manufactured tobacco substitutes.

 

#4. When will a person opting for composition levy pay tax & Return Filing ?

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.(in Form CMP-08). The said persons shall furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4 of the Central Goods and Services Tax Rules, 2017, on or before the 30th day of April following the end of such financial year.

#5. 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.

#6. 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 cannot take credit on his input supplies.

When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.

 

#7 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 cannot 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 cannot avail credit.

 

#8. 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.

 

#9. 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

#10. 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.

 

#11. 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 , 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; and

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 business.

#12. 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 of withdrawal.

#13. 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.

#14. Can supplier of Services opt for composition levy?

Ans.  No, the only exception being supplier of restaurant services. Recently government announces a presumptive scheme for all Service Sector.

#15. Whether Composition Taxpayers can make supply of Services ?

Ans : As per CGST Amendment Act, Now a composition dealer is also allowed to make a supply of services along with goods. But it has a limit, Supply of services can be upto higher of Rs 5 lakhs or 10% of turnover in state.

#16. What are the benefits of Composition Scheme?

Ans:

> Less Compliance

> Reduce tax liability

> High Liquidity

#17. Will Composition Taxpayers be required to pay tax under RCM.

Ans : Yes, Composition Taxpayers will be liable to pay tax under RCM. No credit will be allowed of tax paid.

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