Threshold Limit and GST Rate Applicable in case of Composition Levy [ Section 10 of CGST Act ] - GST Ready Reckoner - GST

Threshold Limit and GST Rate Applicable in case of Composition Levy [ Section 10 of CGST Act Read with Rule 7 of CGST Rules ] Threshold Limit - Section 10(1) Read with provisions of sections 9(3) and section 9(4) , a registered person, whose aggregate turnover in the preceding financial year did not exceed 50 lakh rupees, may opt to pay, in lieu of the tax payable by him. As per First proviso of section 10(1) , the Government may, by notification, increase the said limit of ₹ 50 lakh rupees to such higher amount, not exceeding ₹ 1.5 crore rupees , as may be recommended by the Council. The said aggregate turnover in the preceding financial year shall be ₹ 75 lakh rupees in the case of special category state an eligible registered person, registered under section 25 of CGST Act, [ Notification No. 14/2019 Central Tax dated 7th March, 2019 ] GST Rate Applicable [ Read section 10(1) and section 10(2A) and read with Rule 7 of CGST Rules ] Rate of tax composition levy for goods [ Section 10(1) ] An amount calculated at such rate as may be prescribed, but not exceeding, Sl. No. Category of registered persons Rate of tax but not exceeding 1. Manufacturers, other than manufacturers of such goods as may be notified by the Government [ Ice cream, Pan Masala, Tobbacco products etc. Notification 14/2019-Central Tax Dated 7 th March 2019 ] 1% of the turnover in the State or Union territory 2. Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II [ Restaurant Services ] 2.5% of the turnover in the State or Union territory 3. Any other supplier eligible for composition levy under sections 10(1) and section 10(2) 0.5% of the turnover of taxable supplies of goods and services in the State or Union territory Rate of tax composition levy for Services [ Section 10(2A) ] Sl. No. Category of registered persons Rate of tax but not exceeding 1 Registered persons not eligible under the composition levy under sections 10(1) and (2), but eligible to opt to pay tax under section 10(2A) three per cent. of the turnover of taxable supplies of goods and services in the State or Union territory. Supply of services by composition dealer [ Second proviso of section 10(1) ] A person who opts to pay tax under clause a, b, c of section 10(1) (under composition Scheme) may supply of services - a) value not exceeding 10% of turnover in a state or union territory in preceding financial year, or b) Rs. 5 lakh rupees, whichever is higher Example :- Mr. Ramesh is engaged in supply of mobile parts (goods). His turnover in preceding FY is Rs. 60 lakh. Since his aggregate turnover in the preceding FY does not exceed Rs. 1.5 crore, he is eligible for composition scheme for goods in current FY. Further, in current FY, he want to supply mobile repairing services along with supply of goods [other than restaurant services]. Determine the value of supply of services Mr. Ramesh can supply under Composition scheme. Mr. Ramesh (a) 10% of 60 lakh, i.e. 6 lakh or (b) 5 lakh, whichever is higher. Thus, Mr. Ramesh can supply services upto a value of Rs. 6 lakh in current FY. If the value of services supplied exceeds Rs. 6 lakh, he becomes ineligible for the composition scheme for goods and has to opt out of the same. ( Note: the rate applicable has been reduced from 2% to 1% vide Notification No. 1/2018- Central Tax dated 23.01.2018 effective 01.01.2018) Some Important Point 1. For aggregate Turnover Refer Chapter Concept of Aggregate Turnover in GST 2. Threshold of aggregate turnover to be Read With Notification Notification No. 14/2019 Central Tax