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2017

Composition Levy under GST Law

  • Small dealers and businesses could opt for the composition scheme known as Composition Levy. Under this scheme, a Composite Tax Payer pays tax only at a certain percentage of his turnover.
  • “Aggregate turnover” means the aggregate value of
    1. All taxable and non-taxable Supplies
    2. Exempt supplies and
    3. Exports of goods and/or services
    4. Interstate supplies of a person having the Same PAN
    to be computed on all India bases and excludes taxes, if any, charged under The CGST Act, SGST Act and the IGST Act, as the case may be;
  • Explanation – Aggregate turnover does not include the value of supplies on which tax is Levied on reverse charge basis and the value of inward supplies.

Threshold Limit

  • North East India + Sikkim, Himachal Pradesh and Uttarakhand – Aggregate turnover of the person having same PAN of above Rs 10 lakhs during the previous financial year but does not exceed Rs 75 lakhs.
  • Rest of India – Aggregate turnover of the person having same PAN of above Rs 20 lakhs during the previous financial year but does not exceed Rs 75 lakhs.
  • Government may increase the said limit upto Rs. 1 Crore.

Rate of Levy

Sr. No. Category of registered person Rate of tax (CGST + SGST)
1 Manufacturers, other than manufacturers of such goods as may be notified by the Government 2%
2 Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II 5%
3 Any other supplier eligible for composition levy under section 10 and these rules 1%

Conditions & Restrictions for a Composite Tax Payer

Apart from the threshold limit, the following conditions are applicable for a composite tax payer:
  • He is neither a casual taxable person nor a non-resident person.
  • The goods held in stock by him have not been purchased from an unregistered person and if purchased, need to pay Purchase tax.
  • The goods held in stock by him on the appointed day have not been purchased
    1. In the course of interstate trade or commerce.
    2. Imported from a place outside India.
    3. Receive from his branch situated outside the state.
    4. From his agent or principal outside the state.
  • Cannot be engaged in
    1. supply of services other than restaurant or catering services.
    2. manufacture of specific notified goods.
    3. supply of goods not leviable to tax under GST.
    4. supply of goods through an e-commerce operator.
    5. No Interstate supplies.
  • Cannot claim Input Tax Credit on all his inward supply of goods and / or services.
  • Cannot collect tax on all his outward supply of goods and / or services.
  • Applicable for all business verticals under the same PAN – Composition levy will be applicable for all business verticals operating within state or interstate under the same pan.

    What does this mean?

    • An individual with different business verticals, like:
      1. Mobiles & Accessories
      2. Stationery
      3. Franchisee
    • In the above scenario, the composition scheme will be applicable for all three business verticals. The dealer cannot opt for any one business vertical to fall under the composition scheme.
    • A person who has opted for composition scheme in one state has to opt for composition scheme in other state compulsorily.

Intimation for Composition Levy

  Form GST CMP – 01 Form GST CMP – 02
Eligibility Granted Registration on a provisional basis (Registered under VAT, S.Tax & Excise Law) & who opt to pay tax under Composition Any Registered Person (Registered under GST and Switches to composition scheme) who opt to pay tax under Composition scheme.
Time Line
  • Prior to appointed day or 30 days after appointed day
  • Intimation is filed after appointed day, a Registered Person cannot collect any tax but still issue Bill of Supply
Before start of the financial year for which the option is exercised
ITC
  • Furnish details of stock &
  • Inward supply of goods from Unregistered Person, held by him in Form GST CMP – 03 within 60 days from which the option for composition is exercised
Furnish a statement in Form GST ITC – 03 within 60 days from the commencement of relevant Financial year.

General Note:

  • Any person who applies for registration may give an option to pay tax under section 10 in Part B of Form GST REG – 01, which shall be considered as an intimation to pay tax under the said section.
  • Any intimation 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.
  • 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.
  • He shall mention the words “Composition taxable person” on every notice or sign board display at all place of business.
  • The registered person may not file a fresh intimation every year.

Definition:

  • “Business vertical” means a distinguishable component of an enterprise that is engaged in supplying an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business verticals;

Explanation:

  • Factors that should be considered in determining whether products or services are related include:
    1. the nature of the products or services;
    2. the nature of the production processes;
    3. the type or class of customers for the products or services;
    4. the methods used to distribute the products or provide the services; and
    5. if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

Composition Scheme Rules under GST- Compliance

Form Required Purpose Due Date
Form GST CMP – 01 To opt for scheme by provision registration holder Prior to appointed date or within 30 days of the said date
Form GST CMP – 02 Intimation of willingness to opt for scheme Prior to commencement of Financial Year
Form GST CMP – 03 Details of stock and inward supplies from unregistered Person Within 60 days of exercise of option
Form GST CMP – 04 Intimation of withdrawal from scheme Within 7 days of occurrence of events
Form GST CMP – 05 Show cause notice on contravention of rules or Act by Proper Officer On contravention
Form GST CMP – 06 Reply to Show Cause Notice Within 15 days
Form GST CMP – 07 Issue of Order Within 30 days
Form GST REG – 01 Registration under Composition Scheme Prior to appointed date
Form GST ITC – 01 Details of inputs in stocks, semi-finished and finished goods 30 days of option withdrawn
Form GST ITC – 03 Intimation of ITC available Within 60 days of commencement of Financial Year

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