Composition Scheme in GST - OLD - GST Ready Reckoner - GST

Benefit to small and medium taxable persons except service provider A taxpayer would be required to comply with the detailed procedural task including accounting and paper work which may involve heavy compliance cost. It may be possible that Small / medium taxable persons do not have sufficient knowledge and expertise to comply with the requirements relating to records, accounts filing of detailed monthly returns. Hence, a simplified, though limited, composition scheme has been provided under section 10 of CGST Act. Eligibility A registered person, whose aggregate turnover in the preceding financial year did not exceed 75 lakh rupees. In case of Uttarakhand and Jammu Kashmir also, the turnover limit for Composition Levy will be ₹ 75 lakh. In respect of the following states, (i) Arunachal Pradesh, (ii) Assam, (iii) Manipur, (iv) Meghalaya, (v) Mizoram, (vi) Nagaland, (vii) Sikkim, (viii) Tripura, (ix) Himachal Pradesh. [Notification No. 8/2017-CT dated 27-6-2017] The scheme is not available to supplier of services. However, the service provider engaged in supply of food for human consumption can avail the benefit of this scheme. [As defined in para 6(b) of Schedule II of CGST Act]. [Dhaba / Restaurant services] Rates of tax under composition scheme The taxable person opting for composition scheme will have to pay a fixed percentage of gross turnover as tax. The CGST and SGST rates of composition scheme are as follows [section 10(1) of CGST Act and rule 7 of CGST Rules, 2017]- Sl. No. Category of registered persons Rate of tax CGST+SGST (1) (2) (3) 1. Manufacturers, other than manufacturers of such goods as may be notified by the Government 1% + 1% = 2% 2. Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II 2.5% + 2.5% = 5% 3. Any other supplier eligible for composition levy under section 10 and the provisions of this Chapter 0.5% + 0.5% = 1% Meaning of 'manufacturer' As per section 2(72) of CGST Act, Manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term manufacturer shall be construed accordingly. Manufacturers who are not eligible for composition scheme Following manufacturers of goods will not be eligible for Composition Levy Customs Tariff item 2105 00 00 - Ice cream and other edible ice, whether or not containing cocoa. Customs Tariff item 2106 90 20 - Pan masala Customs Chapter 24 - Tobacco and manufactured tobacco substitutes. [See Notification No. 8/2017-CT dated 27-6-2017]. Restriction and conditions As per section 10(2) of CGST Act, following taxable persons will be eligible for composition scheme- (a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II; (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: In addition Rule 5 provides various conditions and restriction for availing benefit of composition scheme. Various aspects of the Scheme The scheme is optional. The option under the Scheme will be Lapsed if the aggregate turnover during the financial year exceeds the turnover of ₹ 75 Lakhs / 50 Lakhs as the case may be. All registered taxable persons having same PAN number should opt for the composition scheme. For Meaning of 'aggregate turnover' - visit this page Composite Tax at the prescribe ate is payable even on exempted goods also since the same part of aggregate turnover. A taxable person opting for composition scheme is required to pay tax under reverse charge u/s 9(5) if goods or services are procured from unregistered person. Such person is required to issue Bill of Supply instead of tax invoice.