Contents

Para	Topics	Relevant Section/Rules/N
10.0	Purpose of Composition Levy	NA
10.1	Type and conditions for composition levy	NA
10.2	Composition levy on supply of Goods and restaurant services	NA
10.2.1	Aggregate Turnover (AT) limit for composition levy	Section 10(1)
10.2.1.1	CG has increased AT limit from Rs.50 lacs to Rs.0.75/ 1.5 Cr	1st Proviso to Section 10(1)
10.2.1.2	Meaning of AT under GST	Section 2(6)
10.2.1.3	Meaning of AT for composition levy	Explanation 1 to Section 10
10.2.2	Eligible Person for Composition Levy on supply of goods	Section 10(2)
10.2.2.1	He is not engaged in supply of services, other than restaurant and marginal supply of services	Section 10(2)(a)
10.2.2.2	Marginal Supply of services for Composition Levy	2nd Proviso to Section 10(1)
10.2.2.3	He is not engaged in any supplies which are not leviable to tax under this Act	Section 10(2)(b)
10.2.2.4	He is not engaged in any inter-State outward supplies	Section 10(2)(c)
10.2.2.5	He is not engaged in supply through ECO	Rule 7 read with Section 10(2)(d)
10.2.2.6	Composition levy is not available to manufacturer of notified goods	Rule 7 read with Section 10(2)(e)
10.3	Alternative Composition Levy for Supply of Goods or Services upto Rs.50 lacs	NA
10.3.1	Purpose of Section 10(2A)	NA
10.3.2	Composition Levy on supply of services	Section 10(2A)
10.4	GST rate on composition levy	NA
10.4.1	Maximum CGST rate under composition levy	Section 10(1)
10.4.1.1	Meaning of turnover in State/UT for calculation of tax payable by composition dealer	Section 2(112) read with Explanation 2 to Section 10
10.4.2	Applicable CGST rate for composition levy	Rule 7
10.5	Other Conditions & Restriction for Composition Levy	NA
10.5.1	Composition Levy applies uniformly to all RPs having same PAN	Proviso to Section 10(2) or 10(2A)
10.5.2	Restriction on Tax Collection and ITC to Composition dealer	Section 10(4)
10.5.3	Other Conditions for Composition Levy	Rule 5(1)
10.6	Intimation and Stock Details required for opting Composition Levy	NA
10.6.1	Migrating from exiting law to Composition Levy under GST	NA
10.6.1.1	Intimation in CMP-01 for opting composition levy	Rule 3(1)
10.6.1.2	Extension of time limit for CMP-01	Order No. 01/2017-GST
10.6.1.3	Furnishing of Stock Details in CMP-03 within 90 days	Rule 3(4)
10.6.1.4	Extension of time limit for CMP-03 = 31-01-2018	Order No. 11/2017-GST
10.6.2	For new registration, intimation is in Part B of Reg-01 itself	Rule 3(2)
10.6.3	RP switches from Normal levy to Composition Levy	NA
10.6.3.1	Intimation in CMP-02 prior to commencement of FY and furnishing of ITC-03 within 60 days	Rule 3(3)
10.6.3.2	Extension of time limit for CMP-02 and ITC-03 for FY 2020-21 due to COVID-19	1st Proviso to Rule 3(3)
10.6.3.3	Extension of time limit for CMP-02 and ITC-03 for FY 2017-18	Rule 3(3A)
10.6.4	Intimation by RP for one place of business applies uniformly to all other place of business having same PAN	Rule 3(5)
10.6.5	Existing Composition Dealer may continue composition Levy without filing fresh intimation every year	Rule 5(2)
10.6.6	Summary of above	NA
10.7	Date from which Composition levy will be effective	Rule 4
10.8	Validity of Composition levy	NA
10.8.1	Composition Levy lapses on crossing threshold limit	Section 10(3)
10.8.2	Composition Levy remain valid so long as conditions are satisfied	Rule 6(1)
10.8.2.1	RP shall pay tax u/s 9 on withdrawal of Composition Levy and shall intimate in CMP-04	Rule 6(2)
10.8.3	Self withdrawal from Composition Levy through CMP-04	Rule 6(3)
10.9	Penal Provision in case of irregular availment of Composition Scheme	NA
10.9.1	Penal Provision to RP ineligible but opted for Composition Scheme	Section 10(5)
10.9.2	Procedure for issue of Notice/Order by PO for denial of Composition Scheme	NA
10.9.2.1	PO may issue SCN of 15 days in CMP-05 for denial of Composition Option	Rule 6(4)
10.9.2.2	On Receipts of reply, PO may allow or deny Composition Scheme	Rule 6(5)
10.10	Effective Date of withdrawal of Composition Scheme	Circular No. 77/51/2018-GST dt. 31-12-2018
10.11	Procedure after withdrawal from Composition Levy	NA
10.11.1	Furnishing stock details in ITC-01 on withdrawal from Composition Levy within 30 days	Rule 6(6)
10.11.2	Withdrawal from composition levy shall be applied to all RPs of same PAN	Rule 6(7)
10.12	Misc Question	NA

 

10.0 Purpose of Composition Levy

	Composition levy is for small taxpayer The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to prescribed limit.
√	Objective of composition levy is to reduce compliance cost The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers.
√	Composition dealer need not be worry for classification of goods and GST rate. Suppliers opting for composition levy need not worry about the classification of their goods or services or both, the rate of GST applicable on their goods and/ or services, etc. They are not required to raise any tax invoice, but simply need to issue a Bill of Supply wherein no tax will be charged from the recipient.
√	Composition dealer need not to apply tax on every invoice Composition dealer shall, instead of paying tax on every invoice at the specified rate, pay tax at a prescribed percentage of his turnover every quarter.
√	A very simple Annual Return
√	Composition dealer is not required to maintain elaborate records and filing detailed returns.
√	Initially only supply of goods is covered under composition levy. Later, supply of services has also been covered under composition levy.

 

10.1 Type and conditions for composition levy

	2 types of composition scheme are available (a) u/s 10(1) & (2) for supply of goods and restaurant services of AT upto 1.5/0.75 Cr (b)  u/s 10(2A) for supply of goods or services of AT upto 0.50 Cr
	For composition levy, 3 conditions must be satisfied (a) Aggregate Turnover must be within limit prescribed. (b) Registered person must be eligible for composition levy. (c) Applicable GST rate on composition levy.

 

10.2 Composition levy on supply of Goods and restaurant services

 

10.2.1 Aggregate Turnover (AT) limit for composition levy

	Section 10(1) Notwithstanding anything to the contrary contained in this Act [Overrides Section 9] but subject to section 9(3) and (4), [RCM is applicable to Composition dealer] RP, whose aggregate turnover in the preceding FY <= Rs.50 lacs, may opt to pay tax calculated at such rate as prescribed in Rule 7.
	Section 10 overrides section 9 CGST shall be levied as per Section 9 for regular dealer and as per Section 10 for Composition Dealer.
	RCM is applicable to composition dealer Composition dealer is also required to pay GST under RCM as per section 9(3) and (4).

 

10.2.1.1 CG has increased AT limit from Rs.50 lacs to Rs.0.75/ 1.5 Cr

	1st Proviso to Section 10(1) Government may, by notification, increase the said limit of Rs.50 lacs to such higher amount, not exceeding [1][R.1.5 Cr]
	Vide notification No. 14/2019-Central Tax dt. 07-03-2019, government has prescribed AT limit to (a) Rs.75 lacs for specified special category states [AP, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, UK] and (b) Rs.1.5 Cr for other states. Refer above notifications for complete details
	In case of Special Category States of Assam, Himachal Pradesh and J&K, the turnover limit will be Rs.1.5 crore only.
	Question & Answer

 

10.2.1.2 Meaning of AT under GST

Refer Section 2(6) for Meaning of Aggregate Turnover. As per section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) AT does not include GST & Inward supplies on RCM

Ex

Mr X has offices in Maharashtra and Goa. He makes intra-State supply of goods from both these offices. In order to determine whether Mr X is eligible to avail benefit of the composition  for goods, turnover of both the offices would be taken into account and if the same does not exceed Rs.1.5 crore, Mr. X can opt to avail the composition levy scheme (subject to fulfilment of other prescribed conditions) for goods for both the offices.

 

10.2.1.3 Meaning of AT for composition levy

	[2][Explanation 1 to Section 10 For computing AT of person for determining his eligibility to pay tax under this section,   AT includes value of supplies made prior to registration under GST AT includes value of supplies made from 1st day of April of a FY up to the date when he becomes liable for registration under this Act,   AT does not include Interest and Discount Income AT does not include exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.
	Clarification by following order (i) CGST (Removal of Difficulty) Order No. 01/2017-Central Tax dt. 13-10-2017 (ii) CGST (Removal of Difficulty) Order No. 01/2019-Central Tax dt. 01-02-2019   AT does not include Interest and Discount Income Before insertion of above explanation, exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount was not to be included in AT.
	Hence in view of above provision, for composition levy AT includes Taxable supplies Exempt supplies other than interest and discount income Export Inter State supplies by RP of same PAN Value of supplies made prior to registration
	Question & Answer

 

10.2.2 Eligible Person for Composition Levy on supply of goods

Section 10(2) RP shall be eligible to opt for composition levy, if he is not [3][(a) engaged in supply of services, other than restaurant and marginal supply of services] (b) engaged in any supply of goods [4][or services] which are not leviable to tax under this Act. (c) engaged in inter-State outward supplies of goods [5][or services]; (d) engaged in supply of goods [6][or services] through an ECO who is to collect TCS u/s 52; (e) a manufacturer of notified goods; and] [7][(f) a casual taxable person or a non-resident taxable person:]

Question & Answer

 

10.2.2.1 He is not engaged in supply of services, other than restaurant and marginal supply of services

	Position of clause (a) before 01/02/2019 (a) he is not engaged in the supply of services other than restaurant services” From 01/07/2017 to 31/01/2019, supply of all type of services other than restaurant services was not available for composition levy. From 01/02/2019 only marginal value of supply of services was allowed in composition levy under 2nd Proviso to 10(1).
	Question & Answer

 

10.2.2.2 Marginal Supply of services for Composition Levy

	[8][2nd Proviso to Section 10(1) A person who opts to pay tax u/s 10(1) may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State/UT in the preceding FY or Rs.5 lacs, whichever is higher.]   [9][Explanation - Turnover in state or UT does not include interest & Discount income]
√	Position before 01/01/2020 [Before insert of Explanation] CGST (Removal of Difficulty) Order No. 01/2019-Central Tax dt. 01-02-2019. It has been clarified that Interest and Discount income not to be included in Turnover.
	Concept of marginal supply of service was inserted from 01-02-2019.
√	Purpose of 2nd Proviso Fundamentally, the composition scheme can be availed in respect of goods and only one service namely, restaurant service.   Manufacturer/ Trader / Restaurant may also be engaged in supply of services in very small values However, there are cases where a manufacturer/ trader is also engaged in supply of services other than restaurant service though the percentage of such supply of services is very small as compared to the supplies of goods. There may also be cases where a restaurant service provider is also engaged in supplying a small percentage of other services. With a view to enable such taxpayers to avail of the benefit of composition scheme, second proviso to section 10(1) permits marginal supply of services [other than restaurant services] for a specified value along with the supply of goods and/or restaurant service, as the case may be.
Ex	Ramsewak is engaged in supply of 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 can supply services [other than restaurant services] upto a value of not exceeding: (a) 10% of Rs.60 lakh, i.e. Rs.6 lakh (b) Rs.5 lakh, whichever is higher. Thus, he 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.
	Question & Answer

 

10.2.2.3 He is not engaged in any supplies which are not leviable to tax under this Act

	Section 10(2)(b) he is not engaged in any supply of goods or services which are not leviable to tax under this Act.
	He must not be engaged in non-gst supplies, like supply of alcohol, Petrol etc
	Question & Answer

 

10.2.2.4 He is not engaged in any inter-State outward supplies

	Section 10(2)(c) he is not engaged in any inter-State outward supplies of goods or services
	He must not be engaged in inter-state outward supplies of goods and services. There is no restriction on composition supplier to receive inter-State inward supplies of goods or services.
	Question & Answer

 

10.2.2.5 He is not engaged in supply through ECO

	Section 10(2)(d) he is not engaged in supply through an ECO who is to collect TCS u/s 52;
	Question & Answer

 

10.2.2.6 Composition levy is not available to manufacturer of notified goods

	Rule 7 read with Section 10(2)(e) he is not a manufacturer of such goods as may be notified by the Government
	2nd Proviso to Notification No. 14/2019-Central Tax dt. 07-03-2019, Composition levy is not available for notified manufacturer of goods. For list of specified goods, please refer 2nd proviso of above notification.
	Question & Answer

 

10.3 Alternative Composition Levy for Supply of Services upto Rs.50 lacs

 

10.3.1 Purpose of Section 10(2A)

FAQ-7 [FAQ-22/12/2018 Q-21]

Whether Service providers can apply for Composition Levy?

√

Primarily, the composition scheme was available in respect of goods and only one service namely, restaurant service. However, a person engaged exclusively in supply of services or goods and services both other than restaurant service was not eligible for the composition scheme. In order to provide benefit to such suppliers, a scheme to pay tax at the concessional rate has been formulated primarily for small service providers like salon, stylist, tailors etc. who are not otherwise eligible for composition scheme. A mixed supplier who is primarily engaged in supplying services other than restaurant service along with marginal supply of goods could also avail the benefit of this scheme.

 

10.3.2 Composition Levy on supply of services

	[10][Section 10(2A) Notwithstanding anything to the contrary contained in this Act, but subject to the Section 9(3) and (4), RP, not eligible to opt to pay tax u/ss (1) and (2), whose aggregate turnover in the preceding FY did not exceed Rs. 50 lacs, may opt to pay tax calculated at such rate as prescribed in Rule 7, but not exceeding 3% of the turnover in State/UT,   Eligible Person for Composition Levy u/ss (2A) Section 10(2A) also provides that He is not (a) engaged in making any exempt supply of goods/ services; (b) engaged in making any inter-State outward supplies of goods or services; (c) engaged in making any supply of goods or services through an ECO who is required to collect tax at source u/s 52; (d) a manufacturer of such goods or supplier of such services notified by the Government; and (e) a casual taxable person or a non-resident taxable person:
	Person not eligible u/ss (1) and (2) above but eligible u/s (2A), may opt composition levy to pay CGST @ 3% as prescribed in rule 7.
√	Position from 01/04/2019 to 31/12/2019 Composition levy was available to the small service providers vide Notification No. 02/2019-Central Tax (Rate) dt. 07-03-2019. The Provision of said notification was incorporated in section 10(2A) by Finance (No. 2) Act, 2019.
	Question & Answer

 

10.4 GST rate on composition levy

 

10.4.1 Maximum CGST rate under composition levy

Section 10(1) Eligible RP shall pay tax under composition levy at rate prescribed u/r 7, but not exceeding,– (a) 1% of the turnover in State/UT in case of a manufacturer. (b) 2.5% of the turnover in State/UT in case of persons engaged in making supplies referred to clause 6(b) of Schedule II, [Restaurant services] and (c) 0.5% of the turnover in State/UT in case of other suppliers subject to such conditions and restrictions as may be prescribed

Section 10(2A) RP eligible u/s 10(2A) may opt to pay tax at rate as prescribed in Rule 7, but not exceeding 3% of the turnover in State/UT.

 

10.4.1.1 Meaning of turnover in State/UT for calculation of tax payable by composition dealer

	For meaning of turnover in state/UT refer section 2(112)
	Explanation 2 to Section 10 For determining the tax payable by a person under this section, “turnover in State/ UT” shall not include the value of following supplies, namely:– (i) supplies from the first day of April of a FY up to the date when such person becomes liable for registration under this Act; and (ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. 43 of 1961.]
	By virtue of section 2(112) and Explanation 2 to Section 10 For payment of tax by composition dealer, turnover in state/ UT includes All taxable supplies and Exempt supplies made within the State/UT   Turnover in state/ UT does not includes (a) central tax, State tax, Union territory tax, integrated tax and cess; (b) inward supplies on which tax is payable under RCM (c) supplies from the 1st day of April of a FY up to the date when he becomes liable for registration under this Act; and (d) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount
Ex	Mr X has commenced providing photography services in Delhi from April this year. His turnover for various quarters till December is as follows: Apr – Jun = Rs.20 lacs Jul – Sep = Rs.30 lacs Oct – Dec = Rs.20 lacs In the given case, since Mr X has started the supply of services in the current FY, his aggregate turnover in the preceding FY is Nil.   Consequently, in the current FY, he is eligible for composition scheme for services. He becomes eligible for the registration when his aggregate turnover exceeds Rs.20 lakh. While registering under GST, he opts for composition scheme for services. For determining his turnover of the State for payment of tax under composition scheme for services, turnover of April-June quarter [Rs.20 lakh] shall be excluded as the value of supplies from the first day of April of a financial year up to the date when such person becomes liable for registration under this Act are to be excluded for this purpose.

 

10.4.2 Applicable CGST rate for composition levy

	Rule 7 Registered person who is eligible for composition levy u/s 10 and the provisions of this Chapter, and specified in column (2) of the Table below shall pay tax u/s 10 at the rate specified in column (3) of the said [11][Table]:- S N Section Category of RP CGST Rate (1) (1A) (2) (3) 1. 10(1) and (2) Manufacturers, other than manufacturers of notified goods 0.5% of the turnover in the State/ UT 2. 10(1) and (2) Suppliers making restaurant supplies referred to Schedule II(6)(b) 2.5% of the turnover in the State/ UT 3. 10(1) and (2) Any other supplier eligible for composition levy u/s 10(1) and (2) 0.5% of the turnover of taxable supplies of goods and services in the State/ UT 4. 10(2A) RP not eligible under the composition levy u/ss 10(1) and (2), but eligible to opt to pay tax u/ss 10 (2A) 3% of the turnover of supplies of goods and services in the State/ UT .
	1. In case of Trader, GST is payable only for taxable turnover 2. In Other cases, GST is payable for entire turnover whether taxable or exempt
	Question & Answer

 

10.5 Other Conditions & Restriction for Composition Levy

 

10.5.1 Composition Levy applies uniformly to all RPs having same PAN

	Proviso to Section 10(2) and (2A) where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/ss (1) or (2A)  unless all such RPs opt to pay tax under that sub-section.
	If any one branch of RPs having same PAN is not paying GST under composition levy, then no branches of that RPs shall be eligible to pay GST under composition levy.
	Question & Answer

 

10.5.2 Restriction on Tax Collection and ITC to composition dealer

	Section 10(4) Composition Dealer u/ss (1) or (2A)] shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
	Composition Dealer shall not charge GST on outward supplies from his customer and he shall also not claim any ITC.
	Question & Answer

 

10.5.3 Other Conditions for Composition Levy

Rule 5(1) Composition dealer shall comply with the following conditions, namely:- (a) he is neither a casual taxable person nor a non-resident taxable person; (b) 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 u/sr 3(1); (c) goods held in stock by him have not been purchased from an URP and if purchased, he pays the tax u/s 9(4); (d) he shall pay tax u/s 9(3) or (4) on inward supplies; (e) he was not engaged in the manufacture of goods as notified u/c 10(2)(e), during the preceding FY; (f) he shall mention 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 words “composition taxable person” on every notice or signboard displayed at his principal place of business and at every additional places of business.

Question & Answer

 

10.6 Intimation and Stock Details required for opting Composition Levy

 

10.6.1 Migrating from exiting law to Composition Levy under GST

 

10.6.1.1 Intimation in CMP-01 for opting composition levy

Rule 3(1) Person granted provisional registration u/r 24(1)(b) [Migrating to GST] and who opts to pay tax u/s 10 shall intimate in GST CMP-01, [duly signed or verified through EVA], prior to the appointed day, but not later than 30 days after the said day, or such further period as may be extended by the Commissioner.   1st Proviso - If intimation filed after appointed day RP shall not collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day.

Ex

A person registered under existing law (Central Excise/Service Tax/VAT) and who has been granted registration on a provisional basis wants to opt for composition scheme. He must intimae in CMP-01 before appointed day i.e. 01/07/2017 but not later than 30 days.

 

10.6.1.2 Extension of time limit for CMP-01

Vide Order No. 01/2017-GST dt. 21-07-2017, Board has extended the period for filing an intimation in GST CMP-01 upto 16th August, 2017

 

10.6.1.3 Furnishing of Stock Details in CMP-03 within 90 days

	Rule 3(4) RP intimation u/sr 3(1), shall furnish stock details & inward supply of goods received from URP, held by him just before day of exercising of composition levy, in GST CMP-03, within [12][90] days of exercising of composition levy or such further period as may be extended by the Commissioner.
	Question & Answer

 

10.6.1.4 Extension of time limit for CMP-03 = 31-01-2018

Order No. 11/2017-GST dt. 21-12-2017 Commissioner has extended time limit of intimating CMP-03 till 31-01-2018.

 

10.6.2 For new registration, intimation is in Part B of Reg-01 itself

	Rule 3(2) Person applies for new registration u/sr 8(1) [First time registration] may give an option to pay tax u/s 10 in Part B of REG-01, which shall be considered as intimation for composition levy
	Any person applying for new registration under GST laws and he is opting to Composition Levy, then he may select composition scheme at the time of new registration and no separate intimation is required for composition levy.
	Question & Answer

 

10.6.3 RP switches from Normal levy to Composition Levy

 

10.6.3.1 Intimation in CMP-02 prior to commencement of FY and furnishing of ITC-03 within 60 days

	Rule 3(3) RP under normal levy who opts to pay tax u/s 10 shall file an intimation in GST CMP-02, [duly signed or verified through EVC] prior to commencement of the FY [for which option to pay tax u/s 10 is exercised] AND Furnish the statement in GST ITC-03 u/r 44(4) within 60 days from commencement of the relevant FY.
	Any person who switches from normal levy to composition levy in any FY shall - intimate in CMP-02 prior to commencement of FY and; - furnish ITC-03 within 60 days from commencement of the relevant FY
	Question & Answer

 

10.6.3.2 Extension of time limit for CMP-02 and ITC-03 for FY 2020-21 due to COVID-19

[13][1st Proviso to Rule 3(3) RP who opts to pay tax u/s 10 for the FY 2020-21 shall file an intimation in GST CMP-02, [duly signed or verified through EVC] on or before 30-06-2020 and furnish the statement in GST ITC-03 in accordance with rule 44(4) upto 31-07-2020]

 

10.6.3.3 Extension of time limit for CMP-02 and ITC-03 for FY 2017-18

[14][Rule 3(3A) Notwithstanding anything contained in sub-rules (1), (2) and (3), a person who has been granted registration on a provisional basis u/r 24 or [Migration from existing law] certificate of registration u/r 10(1) [New Registration under GST Law] may opt to pay tax u/s 10 wef 1st day of the month immediately succeeding the month in which he files an intimation in GST CMP-02, on or before the 31st day of March, 2018, and shall furnish the statement in GST ITC-03 u/r 44(4) within a period of [15][180 days] from the day on which such person commences to pay tax u/s 10:   1st Proviso - Tran-1 not allowed to be filed after furnishing ITC-03 Said persons shall not be allowed to furnish the declaration in GST TRAN-1 after the statement in GST ITC-03 has been furnished.]

 

10.6.4 Intimation by RP for one place of business applies uniformly to all other place of business having same PAN

	Rule 3(5) Any intimation u/sr (1) or (3) or (3A) in respect of any place of business in any State/UT shall be deemed to be an intimation in respect of all other places of business under same PAN.
	If Composition dealer has more than one registration, then he may intimate in respect of any State/UT and that intimation shall be deemed to be intimation is respect of all other GSTIN no.
	Question & Answer

 

10.6.5 Existing Composition Dealer may continue composition Levy without filing fresh intimation every year

Rule 5(2) RP paying tax u/s 10 may not file a fresh intimation every year and he may continue to pay tax u/s 10 subject to the provisions of the Act and these rules.

 

10.6.6 Summary of above

Rule	Circumstances	Intimation in	Time Limit	Stock Details	Time limit
3(1)	Migration from existing law to Composition levy	CMP-01	Prior to the appointed day, but not later than 30 days after the said day	CMP-03 u/r 3(4)	within 90 days of exercising of composition levy
3(2)	New registration under GST	Part B of REG-01	At the time of application for registration	NA	NA
3(3)	Transition from normal levy to composition levy	CMP-01	Prior to commencement of the FY	ITC-03 u/r 44(4)	within 60 days from commencement of the relevant FY.
5(2)	Existing composition dealer	Not required	May continue without any intimation	NA	NA

 

10.7 Date from which Composition levy will be effective

	Rule 4 Intimation filed under Type or Person filing Intimation Effective date of Composition Levy Rule 3(1) Migrating from existing law to Composition Levy Appointed day [01-07-2017] Rule 3(3) Transition from normal levy to composition levy beginning of the FY Rule 3(2) New registration in GST applies for Composition Levy date fixed u/r 10(2) or (3). .
	For effective date of registration u/r 10(2) or (3), please refer para 25.12.2 of Section 25
	Question & Answer

 

10.8 Validity of Composition levy

 

10.8.1 Composition Levy lapses on crossing threshold limit

	Section 10(3) Composition levy shall lapse wef the day when his aggregate turnover during FY exceeds the limit specified u/ss (1) or (2A)
Ex	A person availing composition scheme during a FY crosses the turnover of Rs.1.5 crore on 9th of Dec. The option availed shall lapse from the day on which his aggregate turnover during the FY exceeds Rs.1.5 crore, i.e. on 9th December, in this case.
	Question & Answer

 

10.8.2 Composition Levy remain valid so long as all conditions are satisfied

Rule 6(1) Composition Levy u/s 10 shall remain valid so long as he satisfies all the conditions mentioned in the said section and rules.

 

10.8.2.1 RP shall pay tax u/s 9 on withdrawal of Composition Levy and shall intimate in CMP-04

Rule 6(2) On withdrawal of composition levy u/r 6(1) person shall pay tax u/s 9(1) [Normal Levy] from the day he ceases to satisfy any of the conditions mentioned u/s 10 or provisions of this Chapter and shall issue tax invoice for every taxable supply made thereafter   Filing of Intimation of withdrawal from Composition Levy in CMP-04 within 7 days He shall also file an intimation for withdrawal from the scheme in GST CMP-04 within 7 days of the occurrence of such event.

Question & Answer

 

10.8.3 Self withdrawal from Composition Levy through CMP-04

	Rule 6(3) RP who intends to withdraw from composition scheme shall file an application in GST CMP-04 before the date of such withdrawal.
	Question & Answer

 

10.9 Penal Provision in case of irregular availment of Composition Scheme

 

10.9.1 Penal Provision to RP ineligible but opted for Composition Scheme 

	Section 10(5) If proper officer has reasons to believe that RP has paid tax under composition levy despite not being eligible, such person shall be liable to pay, tax that may be payable by him under any other provisions of this Act, and penalty u/s 73 or 74.
	Any RP who has wrongly opted for Composition Scheme, shall be liable to pay tax and penalty u/s 73 or 74.

 

10.9.2 Procedure for issue of Notice/Order by PO for denial of Composition Scheme

 

10.9.2.1 PO may issue SCN of 15 days in CMP-05 for denial of Composition Option

Rule 6(4) If proper officer has reasons to believe that RP was not eligible to pay tax u/s 10 or has contravened the provisions of the Act or this Chapter, he may issue a notice to such RP in GST CMP-05 to show cause within 15 days of the receipt of such notice as to why composition levy u/s 10 shall not be denied.

 

10.9.2.2 On Receipts of reply, PO may allow or deny Composition Scheme

Rule 6(5) Upon receipt of reply of the show cause notice issued u/sr (4) from RP in GST CMP-06, proper officer shall issue an order in GST CMP-07 within a 30 days of the receipt of such reply, either accepting the reply, or denying Composition Levy u/s 10 from the date of the option or from the date of the event concerning such contravention.

 

10.10 Effective Date of withdrawal of Composition Scheme

Para 5 of Circular No. 77/51/2018-GST dt. 31-12-2018 has been issued to clarify that what will be effective date in case withdrawal from composition scheme u/r 6(1) or (3) in case of denial from composition scheme u/r 6(5) Para 5 of above circulars has been reproduced below Withdrawal/Denial of composition levy under Effective Date of Withdrawal shall be Rule 6(1) – Composition Levy remain valid so long as conditions are satisfied Rule 6(3) – Self withdrawal from Composition Levy Date indicated in intimation filed in GST CMP-04 but such date may not be prior to the commencement of the FY in which such intimation is being filed. If at any stage it is found that he has contravened any of the provisions of Act or Rules, action may be initiated for recovery of tax, interest and penalty. Rule 6(5) – PO denies Composition Levy by order in GST CMP-07 date, including any retrospective date as determined by PO, but shall not be prior to the date of contravention of the provisions of the CGST Act or Rules. In such cases, as per Section 10(5), proceedings would have to be initiated u/s 73 or 74 for determination of tax, interest and penalty for the period starting from the date of contravention of provisions till the date of issue of order in GST CMP-07. He shall be liable to pay tax u/s 9 from the date of issue of the order in GST CMP-07. .

 

10.11 Procedure after withdrawal from Composition Levy

 

10.11.1 Furnishing stock details in ITC-01 on withdrawal from Composition Levy within 30 days

Rule 6(6) Person who withdraws u/r 6(2) for conditions not satisfied who self withdraws u/r 6(3) or in respect of whom, PO orders of withdrawal in GST CMP-07 u/r 6(5), may furnish a statement in GST ITC-01 containing details of the stock of [inputs, inputs contained in semi-finished or finished goods] on the date on which the option is withdrawn or denied,   Time Limit for furnishing ITC-01 within a period of 30 days from the date from which the option is withdrawn or of the order passed in GST CMP-07.

 

10.11.2 Withdrawal from composition levy shall be applied to all RPs of same PAN

Rule 6(7) Withdrawal from composition levy u/sr 6(2) or (3) or (5) in respect of any place of business in any State or UT, shall be deemed to be an intimation in respect of all other places of business under same PAN.

 

10.12 Misc Question

Question & Answer

 

10.2.1.1 CG has increased AT limit from Rs.50 lacs to Rs.0.75/ 1.5 Cr

Question-1 MCQ-1 [CA-I-SM-Ch3-3]

What is the threshold limit of turnover in the preceding FY to be eligible for composition levy in Delhi? (a) Rs.50 lakh (b) Rs.75 lakh (c) Rs.80 lakh (d) Rs.1.5 crore. [Ans (d)]

 

Question-2 [ICMAI-I-D18-1(c)(ii)-1]

A Person of Tripura is eligible to opt for composition levy provided his previous year turnover exceeds Rs.75 lacs. [T/F]

 

Question-3 [ICAI-I-M18-10c-3]

M/s Sai Trading Company, an eligible registered dealer in goods making intra-state supplies within the state of Andhra Pradesh, has reported an aggregate turnover of Rs.78 Lakhs in preceding FY.

(i) Determine whether Sai Trading Company will be eligible for composition levy, as on 31-10-2017.

(ii) Will your answer be different, if in the above scenario, M/s Sai Trading Company is making intra state supply within the state of Jammu and Kashmir?

Solution-3

(i) Statutory Provisions

As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1 Cr, may opt for composition levy

Comment: Since AT of Preceding FY of M/s Sai is less than Rs.1 Cr, he is eligible for composition levy if it satisfies other conditions of composition levy.

 

(ii) Since the turnover limit for composition scheme in the State of Jammu and Kashmir is also Rs.1 crore, Sai Trading Company will be eligible for composition levy with other condition of not making inter-State supplies of goods being fulfilled.

 

Question-4 [ICSI-E-D20-58-1]

Section 10 of the CGST Act, 2017 contains the provisions regarding composition levy having objective to reduce compliance cost for the small tax payers who are having an annual turnover of less than ` ________ in the preceding financial year. However, in the States of Arunachal Pradesh and Uttarakhand the aggregate turnover limit shall be `________

(A) 1 Cr. ; 50 lakh (B) 1 Cr. ; 75 lakh (C) 1.5 Cr. ; 50 lakh (D) 1.5 Cr. ; 75 lakh

 

Question-4A [ICSI-E-J21-57-1]

For a trader in the State of Uttarakhand, what is the turnover limit for supply of goods in order to opt for Composition Scheme ?

(A) Rs.75 lakhs (B) Rs.100 lakhs (C) Rs.150 lakhs (D) Rs.200 lakhs

 

10.2.1.3 Meaning of AT for composition levy

Question-1

Which of the following is not included in aggregate turnover?

(a) Exempt supplies of goods or services or both

(b) Export of goods or services or both

(c) Inter-State supply of goods or services or both

(d) Value of inward supplies on which tax is paid under reverse charge

 

Question-2 [ICMA-I-Ex-97]****

Ram & Co. being a trader of cell phones registered under GST in the State of Tamil Nadu and furnished the following information relating to preceding FY:

Particulars	Value (Rs. in lacs)
Intra-State supply of taxable goods	120
Intra-State supply of exempted good	10
Intra-State Supply of taxable services	5
Intra-State supply of exempted services	3
Interest earned on deposits/loans/advance	15.50

Whether Ram & Co. is eligible for composition scheme in the current financial year?

Solution-2

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) but AT does not include GST & Inward supplies on RCM.

c) As per Explanation-1 of Section 10 AT does not include interest income as given below

Exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

 

WN-1 AT of Ram & Co for Preceding FY = 120 + 10 + 5 + 3 = Rs.138 lacs

Comment: Since AT of Ram & Co for preceding FY is less than Rs.150 lacs, he is eligible for composition levy.

 

Question-2A [ICSI-E-D19-O-85-1]

Balaji & Co. (firm), Chennai, a trader, furnishes the breakup of goods supplied by it during the year. (i) taxable supplies Rs.40 lakh; (ii) exempt supplies Rs.15 lakh; (iii) export of goods Rs.30 lakh; and (iv) branch transfer of goods Rs.13 lakh.

What is the aggregate turnover for the purpose of deciding the eligibility for composition scheme under GST ?

(A) Rs.98 lakh (B) Rs.85 lakh (C) Rs.55 lakh (D) Rs.40 lakh

 

Question-3 [ICMA-I-Ex-98] [ICMA-F-Ex-93]****

M/s X Ltd. being a manufacturer of laptops has five factories in Chennai, Salem, Coimbatore and Madurai.

Place	P.Y. Turnover Rs.in lakhs (Including Taxes @ 18%)
Chennai I	57.91
Salem	12.00
Coimbatore	8.00
Madurai	30.00
Chennai	43.60
Total	151.51

M/s X Ltd is eligible for composition levy in the current year.

Solution-3

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) but AT does not include GST & Inward supplies on RCM.

 

WN-1 AT of M/s X Ltd for Preceding FY excluding GST = Rs.151.51 x 100/118 = Rs.128.39831 lakhs

Comment: Since AT of M/s X Ltd for preceding FY is less than Rs.1.5 Cr, he is eligible for composition levy.

 

10.2.2 Eligible Person for Composition Levy on supply of goods

T-1 [ICAI-I-M19-8a-5] [ICMAI-I-D18-7b-5]

Enumerate the persons who are not eligible to opt for Composition Scheme under section 10(2) of the CGST Act, 2017.

 

Question-1 [ICSI-E-D19-O-84-1]

Out of the following manufacturer/producer/service provider, who can not avail composition scheme?

(A) Tax payer making interstate supplies (B) Manufacturer (C) Beauty Parlour (D) Restaurant

 

10.2.2.1 He is not engaged in supply of services, other than restaurant and marginal supply of services

Question-1 [ICSI-E-J18-O-79-1]

The following categories of registered persons are not being eligible for the Composition Scheme under the CGST Act, 2017 :

(i) Supplier of the Restaurant Services (ii) Manufacturer of notified goods (iii) Non-resident taxable persons (iv) Casual taxable person

(A) (iii) and (iv)

(B) (ii), (iii) and (iv)

(C) (ii) and (iv)

(D) (i), (iii) and (iv)

 

Question-2 [ICSI-E-D20-O-79-1]

Section 10(2) of the CGST Act, 2017 lays down various conditions and restrictions relating to eligibility for composition levy. Find from the following in this context, which of the statement is not correct :

(A) The scheme is not available for service sector, except restaurants

(B) Tax payer who is not a manufacturer of such goods as may be notified by the government on the recommendation of the council is also not eligible for composition scheme

(C) Tax payer making supplies through e-commerce operators who are required to collect tax at source shall also be eligible for composition scheme.

(D) Tax payers making interstate supplies are eligible for composition scheme which implies that there is no bar on interstate inward supplies

 

Question-3 [ICSI-E-J19-O-75-1]

Composition scheme is not applicable to service providers except the following:

(A) Consultancy Service (B) Restaurant Service (C) Beauty Parlours (D) Cleaning work

 

10.2.2.2 Marginal Supply of services for Composition Levy

Example-1****

Mr X is engaged in supply of goods. His aggregate 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 in current FY.

Further, in current FY, he can supply services [other than restaurant services] upto a value of not exceeding:

(a) 10% of Rs.60 lakh, i.e. Rs.6 lakhor

(b) Rs.5 lakh,

whichever is higher.

If the value of services supplied exceeds Rs.6 lakh, he becomes ineligible for the composition scheme and has to opt out of the composition scheme u/sr 6(1).

 

Question-1 [ICSI-E-J19-4d(i)-2]

Whether the supplier in the following cases is eligible for composition scheme :

Whether X is eligible for composition scheme if he is an interior decorator and is registered in Punjab. His gross receipts in the preceding financial year amounted to Rs.60 Lakh.

 

Question-2 [ICMA-I-Ex-100] [ICMA-F-Ex-95]****

M/s X & Co., sells electrical cables, motors and wires. Company also undertake repair of switches, motor sets. Turnover during preceding financial from sale of goods is Rs.59 lakhs, whereas repairing unit is Rs.1 lakh.

M/s X & Co., is eligible for composition scheme. Advice.

Solution-2

1. Statutory Provision

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

 

2. Facts

a) AT of M/s X & Co for preceding FY = Rs.60 lacs

b) Value of supply of services by M/s X & Co = Rs.1 lacs

 

3. Comment

a) AT of M/s X & Co for preceding FY is less than Rs.150 lacs and

b) Value of supply of services by M/s X & Co is less than Rs.5 lacs

Therefore, the benefit of composition scheme will be extended to M/s X & Co.

 

Question-2A [ICMA-I-Ex-101] [ICMA-F-Ex-96]

Mr. A is a paper merchant own 5,000 sq ft., shop at Chennai. Mr. A offered extra space available in their shop to supplier to put up their advertisement. His turnover in the previous year from sale of goods Rs.20 lakhs and advertising services Rs.2 lakhs. Mr. A is eligible for composition scheme in the current year.

Solution-2A

1. Statutory Provision

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

 

2. Facts

a) AT of Mr. A for preceding FY = Rs.22 lacs

b) Value of supply of services by Mr. A = Rs.2 lacs

 

3. Comment

a) AT of Mr. A for preceding FY is less than Rs.1.5 Cr lacs and

b) Value of supply of services by Mr. A is less than Rs.5 lacs

Therefore, the benefit of composition scheme will be extended to Mr A.

 

Question-2B [ICAI-I-N19-O-9a-5] [ICAI-I-Ch3-12] [ICAI-F-Ch3-5a]

M/s United Electronics, a registered dealer, is supplying all types of electronic appliances in the State of Karnatka. Their aggregate turnover in the FY 2018-19 by way of supply of appliances was Rs.120 lacs.

The firm also expects to provide repair & maintenance services of such appliances from the FY 2019-20.

With reference to latest amendments made in CGSTA, 2017, examine:

(i) Whether the firm can opt for the composition scheme for the FY 2019-20, as the turnover may include supply of both goods and services?

(ii) If yes, upto what amount, the supply of services can be provided

Solution-2B

1. Statutory Provision

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

 

2. Facts

a) AT of M/s United Electronics for preceding FY 2018-19 = Rs.120 lacs

b) Value of supply of services by M/s United Electronics for 2019-20 not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

10% of Turnover = 10% of Rs.120 lacs = Rs.12 lacs or

Rs.5 lacs

 

3. Comment for FY 2019-20

a) AT of M/s United Electronics for preceding FY 2018-19 is less than Rs.1.5 Cr lacs, hence he can opt for composition levy.

b) Value supply of services for Rs.12 lacs by M/s United Electronics can be provided for 2019-20

 

Question-2C [ICAI-F-Ch3-9]

Mr. Prem is running a restaurant in New Delhi. In the preceding financial year, it has an aggregate turnover of Rs.120 lakh from the restaurant services. In the current financial year, apart from restaurant service, he also wants to provide food delivery services to other small restaurants. He estimated the turnover of such services is upto Rs.5 lakh.

Mr. Prem wishes to opt for composition scheme u/s 10(1) and (2) in the current FY. You are required to advise him for same.

 

Question-3 [ICMAI-I-Ex-114] [ICMAI-F-Ex-2]***

Mr. C of Chennai is running a Kirana business. He furnished the following:

Supply	PY	CY
Wheat & Rice (Exempted Supply)	Rs.80 lacs	Rs.88 lacs
Packed products (taxable supply)	Rs.8 lacs	Rs.12 lacs
Rent from commercial property	Rs.10 lacs	Rs.2 lacs
Rent from residential dwelling	Rs.2 lacs	Rs.6 lacs

You are required to answer the following:

(a) Mr. C of Chennai is eligible for composition levy scheme in the current year?

(b) If so, find the GST under composition levy in the current year?

Solution-3

1. Statutory Provision

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

 

2. Facts

a) AT of Mr. C for preceding FY = Rs.100 lacs

b) Value of supply of services by Mr. C for PY = Rs.12

c) Higher of (10% of turnover in a State UT in preceding FY or Rs.5 lacs)

= Higher of (10%*100 lacs or Rs.5 lacs) = Higher of (Rs.10 lacs or Rs.5 lacs) = Rs.10 lacs

 

3. Comment for FY 2019-20

a) AT of Mr. C for preceding FY is less than Rs.1.5 Cr lacs, hence he can opt for composition levy.

b) Value supply of services by Mr. C in preceding FY is more than Rs.10 lacs, hence he cannot opt for Composition Levy.

c) GST will not be levied as per composition scheme.

 

Question-4 [ICAI-F-Ch3-5b]

M/s. Siddharth & Sons, registered in Delhi, owns a restaurant ‘Tasty Foods’ with a turnover of Rs.112 lakh in the preceding financial year. In view of the growing customer demand, it will also start intra-State trading of juices in Delhi. Whether the suppliers are eligible for composition levy u/s 10 in the beginning of the current financial year.

Solution

In the given case:-

(a) The turnover in the preceding year is less than the eligible turnover limit under composition scheme u/s 10(1) and (2) for Delhi, i.e. Rs.1.5 crore.

(b) the supplier is engaged in providing restaurant service which is an eligible supply under said composition scheme.

(c) the supplier wants to engage in trading of goods which is also an eligible supply under said composition scheme.

Thus, M/s. Siddharth & Sons is eligible for composition scheme under sub-sections (1) and (2) of section 10.

 

Question-5 [ICAI-F-Ch3-5c]

Mr X, registered in Sikkim, is engaged in running a restaurant chain ‘Veg Kitchen’ in the State. It has a turnover of Rs.73 lakh in the preceding financial year. In the current financial year, it decides to shut down the food chain owing to huge losses being incurred in the said business. Instead, it will start providing intra-State architect services.

Whether the suppliers are eligible for composition levy u/s 10 in the beginning of the current financial year.

Answer

(a) The turnover in the preceding year is less than the eligible turnover limit under composition scheme u/s 10(1) and (2) for Assam, i.e. Rs.1.5 crore.

(b) the supplier is engaged in providing restaurant service which is an eligible supply under said composition scheme.

(c) the supplier wants to engage in intra-State architect services which is not eligible u/s 10(1) & (2) but it is eligible u/s 10(2A) for AT upto Rs.50 lacs

Thus, Mr X is not eligible for composition scheme under sub-sections 10(1) and (2) and (2A).

 

10.2.2.3 He is not engaged in any supplies which are not leviable to tax under this Act

Question-1 [ICMA-I-Ex-102] [ICMA-F-Ex-97]****

Hotel King Pvt., Ltd. provider of restaurant services in New Delhi. They also serve beer, whisky and so on. Turnover in the preceding previous year is Rs.67 lakhs. Hotel King Pvt. Ltd. is eligible for composition scheme in the current year.

Solution-1

1. Statutory Provision

a) As per section 10(2)(b) for composition levy, RP should not be engaged in supply of goods which are not leviable to tax under CGSTA.

 

2. Facts

a) Hotel King Pvt., Ltd. is engaged in trading of beer, whisky etc which is not leviable to CGSTA

 

3. Comment

Hotel King Pvt., Ltd. is not eligible for composition levy, Since they are supplying the product, which is not levied to GST (namely beer, whisky called as non-taxable supply).

 

Question-1A [ICMAI-I-Ex-117] [ICMAI-F-Q-2]

Mr. Rahim is dealer who is selling taxable goods, exempted goods and non-taxable goods (i.e. Liquor). His turnover in the preceding financial year is Rs.35 lakh, Rs.10 lakh, Rs.15 lakh goods which are leviable to GST, exempted and non-taxable respectively.

Whether Mr. Rahim is eligible for Composition Scheme?

Solution-1A

1. Statutory Provision

a) As per section 10(2)(b) for composition levy, RP should not be engaged in supply of goods which are not leviable to tax under CGSTA.

 

2. Facts

a) Mr. Rahim is engaged in trading of goods which are not leviable to CGSTA

 

3. Comment

Mr. Rahim is not eligible for composition levy, since they are supplying the product, which is not levied to GST.

 

Question-2 [ICAI-I-Ch3-7]

Sultan & Sons, a partnership firm, in Nagpur, Maharashtra is a wholesaler of a taxable product ‘P’ and product ‘Q’ exempt by way of a notification, in the State of Maharashtra. Its aggregate turnover in the preceding financial year is Rs.130 lakh. The firm wishes to opt for composition scheme u/s 10(1) & (2). However, its accountant is of the view that a person engaged in making supply of exempt goods is not eligible for the said scheme. Discuss.

Answer

The view taken by the accountant of Sultan & Sons is not valid in law. A registered person with an aggregate turnover in a preceding financial year up to Rs.1.5 crore is eligible for composition levy, under section 10(1) & 10(2), in Delhi. Further, such person must not be engaged in making any supply of goods or services which are not leviable to tax under this Act and must not be engaged in making any inter-State outward supplies of goods or services, for being eligible to pay tax under said scheme.

In the given case, the aggregate turnover of Sultan & Sons does not exceed Rs.1.5 crore. Further, it is engaged in making only intra-State supply of goods and Product P supplied by it is taxable and Product Q supplied by it is leviable to tax, though exempted by way of notification. Therefore, it is eligible for composition levy under section 10(1) & 10(2) in the current year.

 

Question-3 [ICSI-P-D18-4b-5]

X is a registered trader in Ghaziabad (Uttar Pradesh). In the Financial Year 2017-18 total value of supplies are as follows :

(i)	Intra-state supplies made under forward charge	Rs.35 lacs
(ii)	Intra-state supplies made which are chargeable to GST at Nil rate	Rs.25 lacs
(iii)	Intra-state supplies of goods which are wholly exempt under section 11 of CGST Act, 2017	Rs.30 lacs
(iv)	Value of inward supplies on which tax payable under Reverse Charge Basis (RCM)	Rs.20 lacs

Briefly explain whether X is eligible to opt for Composition Scheme in the financial year 2018-19?

 

10.2.2.4 He is not engaged in any inter-State outward supplies

Question-1 [ICAI-I-Ch3-9(ii)] [Interstate Sales]

Determine whether Mr X is eligible for composition levy provided his turnover in preceding year does not exceed Rs.1.5 crore. He has registered offices in Punjab and Haryana and supplies goods in neighbouring States.

Solution-1

Provision of Section 10(2)(c) applies

Since supplier of inter-State outward supplies of goods is not eligible for composition levy, hence Mr X is not eligible for composition levy.

 

Question-1A [ICMAI-I-Ex-103] [ICMAI-F-Ex-98]

Mr. C of Chennai is a retailer dealing with cell phones. He supplies goods to the person located in Chennai and Pondicherry. Aggregate turnover in the preceding financial year is Rs.45 lakhs. Mr. C wants to opt for composition scheme in the current financial year.

Solution-1A

1. Statutory Provision

a) As per conditions mentioned in section 10(2)(c) for composition levy, RP should not be engaged in interstate outward supply of goods.

 

2. Facts

a) Mr.C is engaged in in interstate outward supplies of goods in Pondicherry

 

3. Comment

Mr. C is not eligible for composition levy, since Mr. C is engaged in interstate outward supplies of goods in Pondicherry.

 

Question-1B [ICSI-E-D18-6A(iii)-5]

Sun Trading Company, an eligible registered dealer in goods making intra-State supplies within the State of Rajasthan has reported an aggregate turnover of Rs.75 lakh in the preceding financial year:

(a) Determine whether Sun Trading Company will be eligible for Composition levy.

(b) Will your answer be different, if Sun Trading Company is making intra-State supply within the State of Jammu and Kashmir?

 

Question-1C [ICSI-E-J19-4d(ii)-2]

Whether A is eligible for composition scheme if he is registered dealer in Haryana supplies goods to its neighbouring states along with intrastate supplies. His total turnover in the current financial year is not likely to exceed Rs.40 Lakh. His aggregate turnover in the preceding financial year was Rs.45 Lakh.

 

Question-2 [ICSI-P-J21-2A(i)(e)-1] [Interstate Purchase]

Mohit, a registered person under GST of U.P. has intra-state sales of Rupees 1.30 crores and purchases from Delhi of Rupees 1.10 crores. He is eligible to opt for composition scheme of GST.

 

Question-2A [ICMAI-I-Ex-118] [ICMA-F-Q-3]

Mr. H registered in Hyderabad, who is selling goods from Telangana to Tamil Nadu. Turnover of Mr. H is Rs.73 Lakh in the preceding financial year. Whether Mr. H is eligible for Composition?

Whether your answer will change if Mr. H is making purchase from Tamil Nadu and selling goods in Telangana?

Solution-2A

1. Statutory Provision

a) As per section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 cr, may opt for composition levy.

b) As per conditions mentioned in section 10(2)(c) for composition levy, RP should not be engaged in interstate outward supply of goods.

 

2. Facts

a) Mr. H AT in preceding FY = Rs.73 lacs

b) Mr. H is engaged in in interstate outward supplies of goods with Tamilnadu.

 

3. Comment

a) Mr. H AT in preceding FY is less than Rs.1.5 cr, hence he is eligible for composition levy.

b) However Mr. H is  not eligible for composition levy, since Mr. H is engaged in in interstate outward supplies of goods with Tamilnadu.

 

If Mr. H is making purchase from Tamil Nadu then he is eligible for composition Scheme as there is restriction on outward interstate supply not on inward interstate supply.

 

Question-3 [ICAI-I-N19-6a-6] [Calculation of AT + Interstate supply]

Mr. Zafar of Assam, provides the following information for the preceding FY 2018-19. You are required to find out the aggregate turnover for eligibility of composition levy scheme and determine whether he is eligible for composition levy scheme or not, for the FY 2019-20.

Particulars	(Rs. in lacs)
Value of taxable outward supplies (out of above Rs.10 lacs was in the course of inter state transaction)	50.00
Value of exempt supplies (which include Rs.30 lacs was received as a interest on loans & Advances	70.00
Value of inward supplies on which he is liable to pay tax under RCM	5.00
Value of Exports	5.00
All the amounts are exclusive of GST

Solution-3

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) but AT does not include GST & Inward supplies on RCM.

c) As per Explanation-1 of Section 10 AT does not include interest income

d) As per section 10(2)(c) for composition levy, RP should not be engaged in interstate outward supply of goods.

 

2. Facts

a) AT as per section 2(6) = 50 + 70 + 5 = 125 lacs

b) AT of Mr. Zafar for Preceding FY 2018-19 for composition levy = 50+40+5 = Rs.95 lacs.

* AT does not include Interest income & Inward supplies under RCM, hence not included above.

b) Mr. Zafar is engaged in in interstate outward supplies of goods & export.

 

3. Comment for FY 2019-20

a) AT of Mr. Zafar Ltd for preceding FY 2018-19 is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) However Mr. Zafar  not eligible for composition levy, since Mr. Zafar engaged in in interstate outward supplies of goods & export

 

Question-4 [ICMAI-I-Ex-122] [ICMA-F-Q-9]****

M/s C Ltd. of Chennai being a trader provided the following information relating to the preceding FY is as follows:

Particulars	Value (Rs. in lacs)
Intra-State supply of taxable goods	20
Intra-State supply of exempted goods	30
Intra-State supply of taxable services	5
Intra-State outward supply of services on which recipient is liable to pay GST	4
Export of goods	35
Inter-State inward supply of goods	200
CGST & SGST paid	2

M/s C Ltd. is eligible for composition scheme in the current financial year?

Solution-4

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) but AT does not include GST & Inward supplies on RCM.

c) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

d) As per conditions mentioned in section 10(2)(c) for composition levy, RP should not be engaged in interstate outward supply of goods.

                                                 

2. Facts

a) AT of M/s C Ltd for Preceding FY = 20+30+5+4+35 = Rs.94 lacs

*AT does not include inward supplies.

b) Value of supply of services by M/s C Ltd for PY = 5+4 = Rs.9 lacs

c) Higher of (10% of turnover in a State UT in preceding FY or Rs.5 lacs)

= Higher of (10%*94 lacs or Rs.5 lacs) = Higher of (Rs.9.4 lacs or Rs.5 lacs) = Rs.9.4 lacs

d) M/s C Ltd is engaged in in interstate outward supplies of goods as export.

 

3. Comment for FY 2019-20

a) AT of M/s C Ltd for preceding FY is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) Value supply of services by M/s C Ltd in preceding FY is less than Rs.9.4 lacs, hence he also satisfied 2^nd condition.

c) However M/s C Ltd  not eligible for composition levy, since M/s C Ltd engaged in in interstate outward supplies of goods as export

 

10.2.2.5 He is not engaged in supply through ECO

Question-1 [ICMA-I-Ex-104] [ICMA-F-Ex-99]***

Peter England is a trader who sells his ready-made clothes online on Amazon India (an ECO). He received an order for Rs.12,00,000 in the previous year. Peter England also supplied goods from there out lets. Aggregate turnover of the company in the previous year was Rs.21,00,000.

Is Peter England eligible for composition scheme?

Solution-1

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per conditions mentioned in section 10(2)(d) for composition levy, RP should not be engaged in supply of goods through ECO who is to collect TCS u/s 52.

 

2. Facts

a) AT of Peter England for Preceding FY  = Rs.21 lacs.

b) Peter England engaged in supply of goods through ECO who is to collect TCS u/s 52.

 

3. Comment

a) AT of Peter England for preceding FY is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) However Peter England  not eligible for composition levy, since Peter England is in supply of goods through ECO who is to collect TCS u/s 52.

 

10.2.2.6 Composition levy is not available to manufacturer of notified goods

Question-1 [ICMAI-D18-1(a)(i)-1]

Which of the following manufacturer cannot opt for composition levy?

(A) Manufacturer of Pan Masala

(B) Manufacturer of Ice Cream

(C) Manufacturer of Tobacco substitutes

(D) All of the above

 

Question-1A [ICMAI-I-D19-2(b)(i)-2]

M/s. Rajesh Khanna Enterprises, Nagpur (Maharashtra), engaged in the business of manufacture of Tobacco products has shown an aggregate turnover of Rs. 90 Lakhs during the Financial year 2018-19. Whether can he opt for composition scheme?

 

Question-2 [ICAI-I-M19-O-9a(1)-1] [Manufacturer of Notified Goods]

Examine in relation to composition levy scheme under the CGST Act, 2017 and the rules made thereunder in the following individual cases :

Ketu is a manufacturer of ice-cream and pan masala in State of Maharashtra. His turnover for the year does not exceed Rs.1 Crore. He wants to register for composition levy scheme. ls he eligible for it?

Solution-2

1. Statutory Provision

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) Rule 7 read with Section 10(2)(e) provides that Composition Levy is not available for notified manufacturer of goods “Ice cream and other edible ice, whether or not containing cocoa & Pan Masala”

2. Facts

a) AT of Ketu for preceding FY = Rs.1 cr

b) Ketu is manufacturing Ice Cream & Pan Masala on which composition levy is not available.

 

Comment: Keu is not eligible for composition levy.

 

Question-3 [ICAI-I-Ch3-9(i)] [Trader of Notified Goods]

Determine whether Mr X is eligible for composition levy provided his turnover in preceding year does not exceed Rs.1.5 crore. He is engaged in trading of pan masala in Rajasthan and is registered in the same State.

Solution-3

1. Statutory Provision

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) Rule 7 read with Section 10(2)(e) provides that Composition Levy is not available for notified manufacturer of goods “Ice cream and other edible ice, whether or not containing cocoa & Pan Masala”

2. Facts

a) AT of Mr X for preceding FY is less than Rs.1.5 cr

b) Mr X is trader of pan masala but not manufacturer.

 

Comment: Mr X is eligible for composition levy.

 

Question-3A [ICMAI-I-D19-2(b)(iii)-2]

M/s. Kwality Ice Cream Parlour, Bangalore (Karnataka), engaged in the business of trading of ice cream has shown an aggregate turnover of Rs. 60 Lakhs during the Financial year 2018-19.  Can he opt for composition scheme?

 

Question-4 [ICMAI-I-D19-2(b)(ii)-2]

M/s. Pramod & Co., Imphal (Manipur), engaged in the business of manufacture of textile carpets has shown an aggregate turnover of Rs. 85 Lakhs during the Financial year 2018-19. Can he opt for composition scheme?

 

Question-5 [ICMAI-I-D19-2(b)(iv)-2]

M/s. British Bakeries, Coimbatore (Tamilnadu) is engaged in the business of supply of bakery products, both in take away packs and/served in ready to eat containers in order to cater the needs of the customers who consume the products on the spot, has shown an aggregate turnover of Rs. 1.26 Crores during the Financial year 2018-19. Can he opt for composition scheme?

 

10.3.2 Composition Levy on supply of services

T-1 [ICSI-P-D21-O-4A(ii)-5]

Who are the ineligible persons to opt alternative composition scheme in GST vide Notification No. 2/2019-CT, dated 7th Mar, 2019.

 

T-2 [ICAI-I-N19-8a-5]

Explain in brief the conditions to be fulfilled by a registered person under GST law for
availing the option to pay concessional tax @ 3% (effective rate 6%) under GST as per
the provisions of notification number 2/2019 CT(R) dated 7-3-2019 as amended, with
effect from 1st April, 2019.

 

Question-1 [ICSI-E-J21-O-83-1]

Out of the following manufacturer/producer/ service provider, who cannot avail composition scheme?

(A) Manufacturer (B) Tax payer making interstate supplies (C) Beauty Parlour (D) Person supplying goods through an electronic commerce operator

 

Question-2 [ICSI-E-D21-61-1]

Section 10 of the CGST Act, 2017 contains the provisions regarding composition levy. Section 10(2A) has enhanced the scope of composition levy primarily for small service providers. Find from the following, who cannot opt for composition levy despite enhancement of its scope :

(i) Supplier of services as Salon Stylist

(ii) Supplier of goods which are not leviable to tax

(iii) Manufacturer of furniture

(iv) Manufacturer of Ice-cream

(v) Casual taxable person

(A) (i), (iii) and (v) (B) (ii), (iv) and (v) (C) (ii), (iii) and (iv) (D) All of the above

 

Question-3

CMA Ram is a practicing Cost Accountant in Patna (Bihar). He commenced profession on 1st April 2019 and his annual turnover (intra-State) of Rs.50 lakh in FY 2019-20. Is he eligible for composition levy for FY 2020-21.

Solution-3

1. Facts

a) CMA Ram is supplier of services in FY 2019-20 for Rs.70 lacs

 

2. Related Provision for composition levy

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) However 2^nd Proviso to Section-10(1) provides that, Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

c) Section-10(2) provides that save as provided in ss (1) RP is not engaged in supply of services.

d) Section 10(2A) provides that RP, not eligible to composition levy u/ss (1) and (2), whose AT in preceding FY did not exceed Rs.50 lacs, may opt to pay tax at rate as may be prescribed, but not exceeding 3% of the turnover in State or UT.

 

3. WN

a) Maximum value of services that can be provided by Mr Ram under 2^nd Proviso to Section 10(1)

= 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher

= 10%*70% or Rs.5 lacs = Rs.7 lacs or Rs.5 lacs = Rs.7 lacs

 

b) maximum value of supply of services that can be provided u/s 10(2A) = Rs.50 lacs

 

4. Comment

Ram cannot opt for composition levy as his value of supply of services is more than Rs.7 lacs u/s 10(1) and is also more than Rs.50 lacs u/s 10(2A).

 

Question-4 [ICAI-F-N19-3a-5]***

Mr. Rajbeer, a registered person at Delhi, is in the business of selling goods relating to interior decoration under the Firm name M/s Rajbeer & Sons. He has opted for Composition scheme for the FY 2019-20.

His turnover for FY 2018-19 is Rs.80 lacs and is expected to achieve Rs.130 lacs in FY 2020-21. Discuss whether M/s Rajbeer & Sons can still enjoy the benefits of Composition scheme in FY 2020-21.

His son Karan wants to start business of providing services relating to interior decoration, after completing post-graduation course in interior decoration under same firm name M/s Rajbeer & Sons wef 01.04.2020 and wants to enjoy the benefits of composition scheme under GST.

Advise Mr. Rajbeer and his son Karan.

Solution-4

1. Facts

a) Turnover of M/s Rajbeer & Sons for 2019-20 = Rs.80 lacs from supply of goods

b) Expected Turnover of M/s Rajbeer & Sons for 2020-21 = Rs.130 lacs from supply of goods

c) His sons wants to start supply of services from 2020-21

 

2. Related Provision for composition levy

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) However 2^nd Proviso to Section-10(1) provides that, Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

c) Section-10(2) provides that save as provided in ss (1) RP is not engaged in supply of services.

d) Section 10(2A) provides that RP, not eligible to composition levy u/ss (1) and (2), whose AT in preceding FY did not exceed Rs.50 lacs, may opt to pay tax at rate as may be prescribed, but not exceeding 3% of the turnover in State or UT.

 

3. WN

a) Maximum value of services that can be provided by M/s Rajbeer & Sons under 2^nd Proviso to Section 10(1) for 2020-21

= 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher

= 10%*130 or Rs.5 lacs = Rs.13 lacs or Rs.5 lacs = Rs.13 lacs

 

b) maximum value of supply of services & Goods that can be provided u/s 10(2A) = Rs.50 lacs

 

4. Comment for composition levy

a) Eligibility of M/s Rajbeer & Sons u/s 10(1)

i) AT of M/s Rajbeer & Sons for FY 2019-20 is less than Rs.1.5 cr, hence he satisfied 1^st condition

ii) Max Value of supply services that can be provided by it u/s 10(1) = Rs.13 lacs

iii) M/s Rajbeer & Sons can opt for composition levy u/s 10(1) and maximum value of supply of services that it can provide is Rs.13 lacs

 

b) M/s Rajbeer & Sons cannot opt alternative composition levy as its AT is more than Rs.50 lacs

 

Question-5 [ICMA-I-Ex-115] [ICMA-F-Ex]****

X & Co. being a supplier of taxable and exempted services registered under GST law in the State of Maharashtra and furnished the following information pertaining to the preceding financial year:

Particulars	Value (Rs. in lacs)
Intra-State supply of taxable output services	22
Intra-State supply of exempted supplies	28
Interest earned on deposits/loans/advances	5

 

Turnover during 1st quarter of the current financial year of X & Co. is as follows:

Particulars	Value (Rs. in lacs)
Intra-State supply of taxable output services	2
Intra-State supply of exempted supplies	8
Interest earned on deposits/loans/advances	5

Find the following:

(a) X & Co. is eligible to opt composition scheme in the current financial year?

(b) If so, find the CGST & SGST liability of X & Co. for the 1st quarter of the current financial year?

Solution-5

1. Related Provision for composition levy

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) Section 2(6) – provides meaning of Aggregate Turnover as follows

AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN)

AT does not include GST & Inward supplies on RCM

c) Explanation-1 of Section 10 provides meaning of AT for Composition Levy

AT does not include interest income

d) However 2^nd Proviso to Section-10(1) provides that, Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

e) Section-10(2) provides that save as provided in ss (1) RP is not engaged in supply of services.

f) Section 10(2A) provides that RP, not eligible to composition levy u/ss (1) and (2), whose AT in preceding FY did not exceed Rs.50 lacs, may opt to pay tax at rate as may be prescribed, but not exceeding 3% of the turnover in State or UT.

 

2. WN

a) AT of X & Co. for preceding FY for composition levy = 22+ 28 = Rs.50 lacs

* Interest income not included in AT as per above provision.

b) Maximum value of services that can be provided by X & Co under 2^nd Proviso to Section 10(1)

= 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher

= 10%*50 or Rs.5 lacs = Rs.5 lacs or Rs.5 lacs = Rs.5 lacs

c) Maximum value of supply of services & Goods that can be provided u/s 10(2A) = Rs.50 lacs

 

4. a) Eligibility of X & Co for composition levy u/s 10(1)

i) AT of X & Co for preceding FY less than Rs.1.5 cr, hence he satisfied 1^st condition

ii) Max Value of supply services that can be provided by it u/s 10(1) = Rs.5 lacs

iii) Mr X cannot opt for composition levy u/s 10(1) as value of supply of services provided by him is more than Rs.5 lacs

 

b) Eligibility of X & Co for alternative composition levy u/s 10(2)

X & Co can opt alternative composition levy u/s 10(2A) as its AT for preceding FY is less than Rs.50 lacs

GST liability of X & Co., during the 1st quarter of the current financial year:

Particulars	Value (Rs. in lacs)
Intra-State supply of taxable output services	2
Intra-State supply of exempted supplies	8
Aggregate Turnover	10
CGST @3%	0.30
SGST @3%	0.30

 

10.4.2 Applicable CGST rate for composition levy

Question-1 [ICAI-I-Ch3-Ill-2] [Trader]

Mr X is a trader (who has opted for composition levy for goods) of both taxable and exempted goods. Compute the amount payable under composition levy u/s 10(1) & 10(2) by Mr X, if following details are given

Aggregate Turnover in PY

Unit	Location	Rs. in lacs
A1	Punjab	85
A2	Rajasthan	30
	Total	115

Turnover in Q1

Unit	Location	Taxable(Rs. in lacs)	Exempt (Rs. in lacs)
A1	Punjab	5	10
A2	Rajasthan	10	10
		15	20

Answer

(a) Since AT of Mr X is less than Rs.1.5 cr in PY, hence he is eligible for composition levy.

(b) As per Rule 7, GST is payable only on taxable supply for trader dealer @1%

(c) Tax payable by Mr X for Q1

Unit	Location	Taxable(Rs. in lacs)	GST Rate	Tax Payable (Rs.)
A1	Punjab	5	1%	5,000
A2	Rajasthan	10	1%	10,000
				15,000

 

Question-1A [ICSI-E-D19-O-87-1] [Trader]

Mumbai Soft Drink is a trader owned by Vineet & Co., a partnership firm selling soft drink. They desire to opt for composition scheme. What is the rate of tax applicable to them under composition scheme ? (A) 0.5% (B) 5% (C) 1% (D) 2.5%

 

Question-2 [ICSI-E-D19-O-83-1] [Restaurant Services]

Pujara of Mumbai is running a restaurant. His aggregate turnover was Rs.60 lakh. He did not collect GST on his Restaurant sales of Rs.60 lakh. His total GST tax liability under composition scheme would be :

(A) Rs.1,20,000 (B) Rs.3,00,000 (C) Rs.60,000 (D) Rs.30,000

 

Question-3 [ICAI-I-Ch3-Ill-1] [Manufacturer]

Mr X is a manufacturer who has opted for composition levy for goods, whose details are as follows

Unit	Location	AT in PY	Turnover in Q1
A1	UP	Rs.85 lacs	Rs.5 lacs
A2	MP	Rs.30 lacs	Rs.10 lacs

Compute the amount payable under composition levy u/s 10(1) & 10(2) by Mr X.

Answer

(a) Since AT of Mr X is less than Rs.1.5 cr in PY, hence he is eligible for composition levy.

(b) As per Rule 7, GST is payable only on taxable supply by manufacturer @1%

(c) Tax payable by Mr X for Q1

Unit	Location	AT in PY (Rs. In lacs)	Turnover in Q1 (Rs. In lacs)	GST Rate	Tax Payable (Rs.)
A1	UP	85	5	1%	5,000
A2	MP	30	10	1%	10,000
		115			15,000

 

Question-4 [ICAI-I-Ch3-Ill-3] [Service]

Mr X is a salon stylist, who has opted for composition levy for services. Compute the amount payable under composition levy u/s 10(2A) by Mr X, if following details are given

Aggregate Turnover in PY

Unit	Location	Rs. in lacs
A1	Delhi	25
A2	Gurgaon	20
	Total	45

Turnover in Q1

Unit	Location	Turnover (Rs. in lacs)
A1	Delhi	5
A2	Gurgaon	10
		15

Answer

(a) Since AT of Mr X is less than Rs.50 lacs in PY, hence he is eligible for composition levy.

(b) As per Rule 7, GST is payable by service provider @ 6% on turnover in state/UT

(c) Tax payable by Mr X for Q1

Unit	Location	Taxable(Rs. in lacs)	GST Rate	Tax Payable (Rs.)
A1	Punjab	5	6%	30,000
A2	Rajasthan	10	6%	60,000
				90,000

 

Question-5 [ICAI-F-N18-2c-3] [ICAI-F-Ch3-10]****

M/s Heeralal and Sons registered in Karnataka has opted to avail the benefit of composition scheme. It has furnished the following details for the tax period ended on 30-06-2018.

Items	Rs.
Taxable turnover of goods within the state	15,00,000
Exempted turnover of goods within the state	17,00,000
Total Turnover	32,00,000

Using the above information, calculate total GST (No need for bifurcation between CGST and SGST) to be paid by the firm for the tax period ended on 30-06-2018 in following independent situations:

(i) M/s Heeralal and Sons is a Manufacturer

(ii) M/s Heeralal and Sons is a Trader

Solution

1. Statutory Provisions

As per Rule 7, RP, In case of manufacturer or restaurant, GST is payable for entire turnover whether taxable or exempt. But in case of Trader, GST is payable only for taxable turnover

 

(i) If M/s Heeralal and Sons is a manufacturer:

Tax is to be paid @ 1% (CGST + SGST ) of the turnover in the State as under:

1% of Rs.32,00,000 [Rs.15,00,000 + Rs.17,00,000] = Rs.32,000

 

(ii) If M/s Heeralal and Sons is a trader:

Tax is to be paid @ 1% (CGST + SGST ) of the turnover of taxable supplies of goods in the State as under:

1% of Rs.15,00,000 = Rs.15,000

 

 

Questio-5A [ICSI-P-J19-1d-5]

Gokhale & Sons is registered in Karnataka and paying GST under composition scheme, provides the following details for the tax period ended on 31st December, 2018 :

Items	Rs.
Taxable turnover of goods within the state	25,00,000
Exempted turnover of goods within the state	27,00,000
Total Turnover	52,00,000

Calculate the total GST without bifurcation between CGST and SGST to be paid by Gokhale & Sons for the tax period ended on 31st December, 2018 in following independent situation on the basis of details of turnover as given

(i) If Gokhale & Sons is Manufacturer (ii) If Gokhale & Sons is Trader

 

Question-6 [ICSI-P-J21-2(c)(ii)-3]

Z Ltd. registered under GST and having opted for simplified composition scheme (as prescribed under Notification No. 2/2019 – CT (Rate) has furnished the following details :

Supply of services (attracting GST @ 18%)	20,00,000
Supply of goods (attracting GST @ 12%)	20,00,000
Inward supplies (subject to reverse charge u/s 9(3) of CGST Act 2017 attracting GST @ 18%)	5,00,000

Calculate the tax liability of Z Ltd.

Answer

Calculation of Tax Liability of Z Ltd. under New Composition Scheme

Type of Transaction	Taxable Amt	GST Rate	Tax
Supply of services (attracting GST @ 18%)	20,00,000	6%	1,20,000
Supply of goods (attracting GST @ 12%)	20,00,000	6%	1,20,000
Inward supplies (subject to reverse charge u/s 9(3) of CGST Act 2017 attracting GST @ 18%)	5,00,000	18%	90,000

 

Question-7 [ICSI-P-D21-1(d)-5]

Lokesh Pvt. Ltd a company engaged in the manufacturing of auto parts and spares having registered office and factory located at Jaipur has got itself registered under the composition scheme for the purpose of tax under GST. Company furnishes the following information/details and of the total value of supplies including inward supplies taxed under reverse charge basis for the financial year 2020-21:

Type of Transaction	Taxable Amt
Intra-state supplies of auto spares ‘V’ units chargeable to GST @12%	36,00,000
Intra-state supplies of auto spares ‘X’ chargeable to GST @ 5%	30,00,000
Inward supplies on which tax payable under RCM having GST rate of 18%	9,60,000
Intra-state supplies wholly exempt u/s 11	16,40,000

Determine the tax liability of Lokesh Pvt. Ltd. payable under composition and the gross total tax liability for the Financial year 2020-21.

 

Question-8 [ICAI-I-Ch3-11]

Mr. Ajay has a registered repair centre where electronic goods are repaired/serviced. His repair centre is located in State of Rajasthan and he is not engaged in making any inter-State supply of services. His aggregate turnover in the preceding financial year (FY) is Rs.45 lakh.

With reference to the provisions of the CGST Act, 2017, examine whether Mr. Ajay can opt for the composition scheme under section 10(1) &10(2) in the current financial year? Or whether he is eligible to avail benefit of composition scheme under section 10(2A)? Considering the option of payment of tax available to Mr. Ajay, compute the amount of tax payable by him assuming that his aggregate turnover in the current financial year is Rs.35 lakh.

Will your answer be different if Mr. Ajay procures few items required for providing repair services from neighbouring State of Madhya Pradesh?

 

Question-9 [ICAI-F-Ch3-8]

Shubhlaxmi Foods is engaged in supplying restaurant service in Maharashtra. In the preceding financial year, it had a turnover of Rs.140 lakh from the restaurant service. Further, it had earned the bank interest of Rs.20 lakh from the fixed deposits. You are required to advise Shubhlaxmi Foods whether it is eligible for the composition scheme u/s 10(1) and (2) in the current financial year.

Further, assuming that in the current financial year, its turnover is Rs.130 lakh from the supply of restaurant services and Rs.10 lakh from the supply of farm labour in Maharashtra. It has also earned the bank interest of Rs.30 lakh from the fixed deposits. Compute the tax payable by Shubhlaxmi Foods in the current FY.

 

Question-10 [ICSI-P-D21-3c-4]

Xavier started profession of Architect w.e.f. 01.04.2020. His value of intra-state taxable supply upto 30.09.2020 was `20 lakh. He applied for registration on 01.10.2020 and opted for Presumptive Scheme for service suppliers in registration application and was granted registration as per provisions of GST law. He made intra-state taxable supplies of `35 lakh for the quarter ending 31.12.2020.

You are required to determine the Presumptive tax liability of Xavier under Notification No. 2/2019-CT(R) for the period 01.04.2020 to 31.12.2020.

 

10.5.1 Composition Levy applies uniformly to all RPs having same PAN

Question-1 [ICAI-I-Ch3-10] [ICAI-F-Ch3-12]

Mr X has two registered places of business in Delhi. Its aggregate turnover for the preceding year for both the places of business was Rs.120 lakh. It wishes to pay tax under composition levy, u/s 10(1) & (2), for one of the places of business in the current year while under normal levy for other.  You are required to advice Mr X whether he can do so?

Answer

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Proviso to section 10(2) for composition levy, where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1) unless all such RPs opt to Composition levy

 

2. Facts

a) AT of Mr X for Preceding FY = Rs.120 lacs.

b) Mr X has two registered places of business in Delhi.

 

3. Comment

a) AT of Mr X for preceding FY is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) As per Proviso to section 10(2) for composition levy, where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1) unless all such RPs opt to Composition levy.

Thus, Mr X either have to opt for composition levy for both the places of business or under normal levy for both the places of business.

 

Question-1A [ICAI-I-M19-O-9a(3)-2]

Examine in relation to composition levy scheme under the CGST Act, 2017 and the rules made thereunder in the following case:

X Ltd. has 2 branches K & L in Delhi, having same PAN. Branch K opts for normal scheme. X Ltd. want to continue composition levy in case of its branch L. Can X Ltd. continue composition levy only for branch L?

 

Question-1B [ICSI-E-D21-59-1]

A registered person can opt under Composition Levy only in respect of one out of his two or more business verticals having same PAN as per provisions of the CGST Act, 2017.

(A) Yes (B) No (C) Yes, subject to prior approval of proper officer (D) Yes, subject to prior approval of GST Council

 

Question-1C [ICSI-P-J21- 2A(i)(c)-1]

Jai Singh has GST registration in two different states in his own Permanent Account Number. He cannot opt. for composition scheme in one state and normal scheme in another state. [T/F]

 

Question-1D [ICAI-F-N18-O-3b-3]

MN Ltd. has two registered business verticals in the State of Haryana. Its aggregate turnover during the previous financial year for both the business verticals was Rs.62 lakh. It wishes to opt for composition levy for one of the verticals in the current year and wants to continue with registration and pay taxes at the merit rate for the second vertical. Can MN Ltd. do so? Explain with reason.

 

Question-2 [ICAI-I-N18-O-10b(i)-2]***

Mr. X is running a consulting firm and also a readymade garment showroom in Kolkata registered in same PAN. Turnover of the showroom is Rs.70 lakh and receipt of consultancy firm is Rs.15 lakh in the preceding financial year. You are required to answer the following:

(1) Is Mr. X eligible for composition scheme?

(2) Is it possible for Mr. X to opt for composition scheme only for showroom?

Answer

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

c) As per section 10(2A) RP, whose AT in preceding FY did not exceed Rs.0.5 Cr, may opt for composition levy if he is not eligible u/s 10(1) and (2).

 

2. Facts

a) AT of Mr. X for preceding FY = Rs.85 lacs

b) Value of supply of services by Mr. X for PY = Rs.15 lacs

c) Higher of (10% of turnover in a State UT in preceding FY or Rs.5 lacs)

= Higher of (10%*85 lacs or Rs.5 lacs) = Higher of (Rs.8.5 lacs or Rs.5 lacs) = Rs.8.5 lacs

d) Mr. X is running a consulting firm and also a readymade garment showroom in Kolkata registered in same PAN.

 

3. Comment

a) AT of Mr. X for preceding FY is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) Value supply of services by Mr. X in preceding FY is more than Rs.8.5 lacs, hence he did not satisfied 2^nd condition.

(i) Mr. X is not eligible for composition levy, as he did not satisfied both conditions.

 

(ii)

As per Proviso to section 10(2) for composition levy, where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1) unless all such RPs opt to Composition levy.

Thus, Mr X either have to opt for composition levy for both the places of business or under normal levy for both the places of business.

 

Question-2A [ICAI-I-M18-O-12a-5]

M/s. Ginny and John Company is a partnership firm of interior decorators and also running a readymade garment showroom. Turnover of the showroom was Rs.80 lakh and receipts of the interior decorators service was Rs. 22 Lakh in the preceding financial year.

With reference to the provisions of the CGST Act, 2017, examine whether the firm can opt for the composition scheme?

Will your answer change, if the turnover of the showroom was Rs.70 lakh and receipts of the interior decorators service was Rs.22 Lakh in the preceding financial year ?

Also discuss whether it is possible for M/s. Ginny and John Company to opt for composition scheme only for showroom?

Solution-2A

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

 

2. Facts

a) AT of M/s. Ginny and John Company for preceding FY = Rs.102 lacs

b) Value of supply of services by M/s. Ginny and John Company for PY = Rs.22 lacs

c) Higher of (10% of turnover in a State UT in preceding FY or Rs.5 lacs)

= Higher of (10%*102 lacs or Rs.5 lacs) = Higher of (Rs.10.2 lacs or Rs.5 lacs) = Rs.10.2 lacs

d) M/s. Ginny and John Company is a partnership firm of interior decorators and also running a readymade garment showroom.

 

3. Comment

a) AT of M/s. Ginny and John Company for preceding FY is less than Rs.1.5 Cr lacs, hence it satisfied first condition.

b) Value supply of services by M/s. Ginny and John Company in preceding FY is more than Rs.10.2 lacs, hence it did not satisfied 2^nd condition.

(i) M/s. Ginny and John Company is not eligible for composition levy, as he did not satisfied both conditions.

 

As per Proviso to section 10(2) for composition levy, where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1) unless all such RPs opt to Composition levy.

Thus, Mr X either have to opt for composition levy for both the places of business or under normal levy for both the places of business.

 

(ii) In case also answer will remain the same i.e., the company will not be eligible to opt for composition scheme even with the change in the turnovers as given in the second case.

 

(iii) As per Proviso to section 10(2) for composition levy, where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1) unless all such RPs opt to Composition levy.

Thus, M/s. Ginny and John Company either have to opt for composition levy for both the places of business or under normal levy for both the places of business.

 

Question-2B [ICMAI-I-J19-2a-8] ][ICMA-I-Ex-116] [ICMA-F-Q-1]

Mr. Sitaram is running a consulting firm and also a readymade garment show room, registered in same PAN. Turnover of the showroom is Rs.60 lakh and receipt of the consultancy firm is Rs.12 Lakh in the preceding FY. You are required to answer the following:

a) Is Mr. Sitaram eligible for Composition Scheme?

b) Whether it is possible for Mr. Sitaram to opt for composition only for Showroom?

c) Rework, if Mr. Sitaram is running a restaurant as well as readymade garment show room, whether he is eligible for composition?

d) If the turnover of garment showroom is Rs.75 Lakh in the preceding financial year and there is no consulting firm whether he is eligible for Composition?

Soltuion-2B

a) Mr. Sitaram is providing services in consulting firm hence he is not eligible for composition scheme.

b) If a business is ineligible to opt for composition then all other business registered under the same PAN shall automatically ineligible for the composition scheme. So Mr. Sitaram is not eligible for composition scheme only for showroom.

c) Restaurant services and readymade garments show room are eligible for the composition scheme. Hence Mr. Sitaram is eligible for Composition Scheme, since, his aggregate turnover is Rs.72 lakhs (i.e. less than Rs.1.50 crore).

d) Yes, Mr. Sitaram is eligible for composition scheme as turnover of his firm does not exceed Rs.1.50 crore in the preceding FY.

 

Question-2C [ICAI-F-M18-2b-3] [ICMA-I-Ex-107]

Prem is running a consulting firm and also a fancy store, registered under the same PAN. Turnover of the fancy store is Rs.65,00,000 and receipt of consultancy firm is Rs.10,00,000 in the preceding FY. You are required to provide answers with supporting explanatory note for each answer to the following questions:

(i) Is Prem eligible for composition scheme under CGST Act?

(ii) Whether it is possible for Prem to opt composition scheme only for fancy store?

(iii) If prem is running a restaurant with turnover of Rs.65,00,000 instead of consultancy firm as well as a fancy store, would he be eligible for composition scheme?

Solution-2C

(i) As per section 10(2)(a) of CGST Act, 2017 if a taxable person is engaged in the supply of services (other than restaurant and outdoor catering service) is not eligible for Composition Scheme under CGST Act, 2017.Therefore, Prem is not eligible for composition scheme.

(ii) If a business is ineligible to opt for composition, then all other business registered under the same PAN shall automatically ineligible for the composition scheme. So Prem is not eligible for composition scheme only for fancy store.

(iii) Restaurant services and fancy store are eligible for the composition scheme provided the aggregate turnover does not exceeds Rs.1.50 crore (in case of special category status States Rs.75 lac). Hence, Prem is eligible for Composition Scheme. Since, his aggregate turnover is Rs.130 lakhs (i.e. not more than Rs.1.50 crore).

 

Question-3 [ICMAI-F-D19-7a-5]

Mr Shankar is running a fancy stores and is also having a consulting firm, registered under the same PAN. During the earlier year, the turnover was Rs.150 lacs in the grocery stores and receipts in the consulting firm was Rs.9 lacs. In the light of these facts, answer the following (having regard to the legal provision prevailing in April, 2019);

(i) Estimate whether Mr. Shankar eligible to opt for composition levy under CGST Act.

(ii) Can he opt for the composition scheme in respect of the grocery store alone, though he has the consulting firm also, in addition to the store?

 

10.5.2 Restriction on Tax Collection and ITC to Composition dealer

Question-1 [ICSI-E-J21-O-82-1] [Collection of tax]

Which out of the following is a correct statement regarding collection of composition tax from customers?

(A) The registered person under composition scheme is not permitted to collect tax. It means that a composition scheme supplier cannot issue a tax invoice.

(B) The registered person under composition scheme is permitted to collect tax. It means that a composition scheme supplier cannot issue a tax invoice.

(C) The registered person under composition scheme is permitted to collect tax. It means that a composition scheme supplier can issue a tax invoice.

(D) The registered person under composition scheme is not permitted to collect tax. It means that a composition scheme supplier can issue a tax invoice.

 

Question-2 [ICSI-E-J22-51-1] [ITC]

Can the taxable person under Composition Scheme claim input tax credit ?

(A) Yes (B) No (C) Only in some specific cases (D) After the approval of GST Council

 

Question-3 [ICSI-P-J19-O-5e-3]

Explain by giving brief reasons in the context of provisions contained under the CGST Act, 2017 pertaining to composition scheme :

(i) Can a registered person, who purchases goods from a supplier paying tax under the Composition Scheme, avail credit of tax paid on purchases made from the composition dealer?

(ii) Can a person paying tax under the Composition Scheme issue a tax invoice under GST?

(iii) Can a person who has opted to pay tax under the Composition Scheme avail Input Tax Credit on his inward supplies?

 

10.5.3 Other Conditions for Composition Levy

Question-1 [FAQ-22/12/2018]

A person opting to pay tax under the composition scheme receives inputs/input services from an unregistered person. Will the composition dealer have to pay GST under reverse charge? If yes, in what manner?

Ans. No. The requirement to pay GST on reverse charge basis under section 9(4) of the CGST Act has been removed wef 13.10.2017 till 30.09.2019.

 

Question-2 [ICMAI-I-J19-1(d)(iv)-1]

In case of supply of goods by a composite dealer, the registered person shall issue ___________.

 

Question-3 [ICSI-P-D20-O-4b(i)-3]

State in brief as per provisions of the CGST Act, 2017, a composition dealer/ supplier how should raise GST bill/invoice for the supply of goods. Explain also what should be prominently stated on such invoice. Specify and state the rates of tax applicable to a dealer opting for composition scheme.

 

10.6.1.3 Furnishing of Stock Details in CMP-03 within 90 days

Question-1 [ICSI-E-D20-60-1]

A person opting to pay tax as per section 10 of the CGST Act, 2017 under composition levy shall as required in Chapter-II of Central Goods and Service Tax Rules, 2017 within 90 days of exercise of option give the intimation of details of stock and inward supplies from unregistered person in Form No._____

(A) GST CMP - 1 (B) GST CMP - 2 (C) GST CMP - 3 (D) GST CMP - 4

 

Quesiton-2 [ICSI-E-D19-O-86-1]

A dealer wishing to opt for composition scheme, must convey his option :

(A) Within a period of 60 days from the commencement of the relevant financial year

(B) Within 90 days from the commencement of the relevant financial year

(C) Within 30 days from the commencement of the relevant financial year

(D) Within 10 days from the commencement of the relevant financial year

 

10.6.2 For new registration, intimation is in Part B of Reg-01 itself

Questio-1 [FAQ-22/12/2018 Q-37]

Can a person making application for fresh registration under GST opt for composition levy at the time of making application for registration?

Ans. Yes. Such persons 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.

 

10.6.3.1 Intimation in CMP-02 prior to commencement of FY and furnishing of ITC-03 within 60 days

Quesiton-1 [ICSI-E-D20-O-77-1]

According to Rule - 3 of CGST Rules, any registered person opts to pay tax under section 10 of the CGST Act, 2017 shall file an intimation in Form GST ________ prior to commencement of financial year and shall also furnish the statement in Form GST ________ within 60 days from the commencement of relevant financial year.

(A) CMP-01, ITC-1

(B) CMP-02, ITC-3

(C) CMP-03, ITC-3

(D) CMP-02, ITC-2

 

10.6.4 Intimation by RP for one place of business applies uniformly to all other place of business having same PAN

Question-1 [ICMA-I-Ex-99] [ICMA-F-Ex-94]

M/s Y Ltd. being a trader of laptops has two units in Chennai and in Mumbai.

Place	P.Y Turnover (Rs. in lacs) (Excluding Tax)
Chennai	52.00
Mumbai	12.00

You are required to answer the following:

(a) M/s Y Ltd is eligible for composition levy in the current year.

(b) If so, M/s Y Ltd can opt composition scheme for Chennai location and normal scheme for Mumbai.

(c) Need to give separate intimations for opting composition scheme in each State.

Solution-1

1. Statutory Provision

a) section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b)  Proviso to Section 10(2) provides that where more than one RPs are having same PAN, RP shall not be eligible for composition levy u/s 10(1)

unless all such RPs opt to pay tax under that sub-section.

c) Rule 3(5) provides that Intimation by one RP applies uniformly to all RPs of same PAN.

 

2. Comments

(a) AT of M/s Y Ltd for preceding FY is less than Rs.1.5 cr, hence he is eligible for Composition Levy.

(b) As per Proviso to Section 10(2), Composition Levy applies to all RPs under same PAN, hence M/s Y Ltd cannot opt composition scheme for one location normal scheme for another location.

(c) Intimation to opt composition scheme in respect of any place of business in any State or Union Territory shall be deemed to be intimation in respect of all other places of business registered on the same PAN.

 

10.7 Date from which Composition levy will be effective

Example-1 [ICMAI-I-Ex-109] [ICMA-F-Ex-102] [Rule 10(2)]

If a person is liable to be registered on 1st Oct 20XX and he has applied for registration on 17th Oct 20XX, the date of registration will be 1st Oct 20XX. As a result effective date of registration for composition levy is 1st Oct 20XX.

 

Example-1A [ICMAI-I-Ex-111] [ICMA-F-Ex-104]

If a person is liable to be registered on 11th Jan 2020 and he has applied for registration on 17th Jan 2020, what is the effective date of registration for composition levy.

Answer: Effective date of registration for composition levy is 11th Jan 2020.

 

Example-2 [ICMAI-I-Ex-110] [ICMA-F-Ex-103] [Rule 10(3)]

If a person is liable to be registered on 1st Oct 20XX and he has applied for registration on 17th Nov 20XX. Registration granted on 20th Nov 20XX. The effective date of registration will be the date of grant of registration (i.e. 20th Nov 20XX). As a result effective date of registration will be effective date for opting for composition scheme (i.e. 20th Nov 20XX)

 

Example-2A [ICMAI-I-Ex-112] [ICMA-F-Ex-105]

A person is liable to be registered on 1st Feb 20XX and he has applied for registration on 17th Mar 20XX. Registration granted on 20th Mar 20XX. What is the effective date of registration if he wants to opt composition levy.

Answer: The effective date of registration will be the date of grant of registration. As a result effective date of registration will be effective date for opting for composition scheme (i.e. 20th Mar 20XX) provided no discrepancies found.

 

10.8.1 Composition Levy lapses on crossing threshold limit

Question-1 [ICAI-I-M19-O-9a(2)-2] [ICAI-I-Ch3-8]

Jadhu of Gujarat opts for composition scheme during a FY 2017-18. But on 10-02-2018 his turnover crosses Rs.1 Crore, can he continue under composition levy scheme.

Solution-1

Section 10(3) provides that Composition levy shall lapse wef the day when his AT during FY exceeds the limit specified u/ss (1) or (2A).

AT of Jadhu cross threshold limit on 10-02-2018, hence composition levy shall lapse from 10-02-2018.

 

Question-1A [ICSI-P-J21-2c(i)-2]

X Ltd. availing the composition scheme under GST Act and paying taxes accordingly had a turnover from the supply of goods of Rupees 150 Lakhs. upto 31st December, 2020. On the 1st of January, 2021 (01.01.2021) another supply of Rupees 1.20 Lakhs was made. Explain whether X Ltd can continue to avail the composition scheme and the relevant provision of GST Act, 2017 in this regard.

 

Question-1B [ICSI-E-D18-O-76-1]

Mr. S, a manufacturer of medicines, whose turnover for financial year 2017-18 was of Rs.70 lakh opted to pay tax under GST as per composition scheme from 1st April, 2018. His turnover crosses Rs.1 crore on 30 November, 2018.

Will he be allowed to pay tax under composition scheme for the remainder of year i.e. from 1st December, 2018 to 31st March, 2019 ?

(A) Yes, he can avail the benefit till 31st March, 2019

(B) No, the option availed shall lapse from the day on which his aggregate turnover during the financial year 2018-19 exceeds Rs.1 crore

(C) Yes, the option can be availed upto completion of half financial year i.e. till 30th September, 2018

(D) None of the above

 

10.8.2.1 RP shall pay tax u/s 9 on withdrawal of Composition Levy and shall intimate in CMP-04

Question-1 [ICSI-E-D19-O-88-1]

The aggregate turnover of Turner & Co. exceeded the limit prescribed for composition scheme on 7-3-2019. What is the course of action to be adopted by Turner & Co. for rest of the financial year ?

(A) Intimate within 7 days to the GST authority and pay GST as normal supplier of goods.

(B) Suspend business till 31-3-2019.

(C) Compute and pay tax as normal supplier w.e.f. 1-4-2018.

(D) Since the period is less than 30 days for the end of the financial year, continue the business as composition dealer.

 

Question-2 [ICAI-F-Ch3-4] [Tax Liability on cross threshold limit]

Mr X started a partnership firm of architects in Bhopal (Madhya Pradesh) on 1^st April. The firm provides architecture services in Madhya Pradesh only. It provided the following details of its turnover during the current financial year:

Apr-Jun	Rs.20 lacs
Jul-Sep	Rs.30 lacs
Oct-Dec	Rs.20 lacs

The firm has obtained the registration u/s 22 with effect from 1^st July and opts to pay tax under composition scheme. Determine the tax liability of Mr X for the quarters: April – June, Jul-Sept and Oct-Dec.

Note: The rates of tax on architectural services are CGST- 9% and SGST-9%.

Answer

Mr X is eligible for composition levy for Apr to Sep, as his AT exceeds threshold limit from Oct. From oct onwards normal levy will be applicable @ 18%

Period	Turnover	Levy	Rate	Tax
Apr-Jun	Rs.20 lacs	Composition	0	0
Jul-Sep	Rs.30 lacs	Composition	6%	1,80,000
Oct-Dec	Rs.20 lacs	Normal	18%	3,60,000

 

10.8.3 Self withdrawal from Composition Levy through CMP-04

Question-1 [ICSI-E-J18-O-100-1]

A registered supplier under composition levy can withdraw at any time and be required to file the Form for withdrawal from composition levy in :

(A) GST CMP-3 (B) GST CMP-4 (C) GST MIS-1 (D) GST PCT-2

 

10.12 Misc Question

T-1[ICSI-P-D17-4A(ii)(ii)-2]

Explain Composition levy in the context of CGST Act, 2017

 

Question-1 [ICSI-P-D19-1a-5]

Parikh is a practising Company Secretary at Mumbai. His gross fee receipts for FY 2018-19 was Rs.28 lakhs. He estimated his gross receipts at Rs.32 lakhs for the financial year 2019-20. He wants to avail composition scheme for the financial year 2020-21. Briefly narrate whether he can avail composition scheme for the financial year 2020-21 with attendant conditions. Will he be eligible to avail input tax credit ? Can he issue tax invoice

Solution-1

1. Facts

a) AT of Parikh for 2019-20 = Rs.32 lacs from supply of Services

 

2. Related Provision for composition levy

a) Section 10(1) provides that RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy.

b) However 2^nd Proviso to Section-10(1) provides that, Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

c) Section-10(2) provides that save as provided in ss (1) RP is not engaged in supply of services.

d) Section 10(2A) provides that RP, not eligible to composition levy u/ss (1) and (2), whose AT in preceding FY did not exceed Rs.50 lacs, may opt to pay tax at rate as may be prescribed, but not exceeding 3% of the turnover in State or UT.

 

3. WN

a) Maximum value of services that can be provided by Parikh under 2^nd Proviso to Section 10(1) for 2020-21

= 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher

= 10%*32 or Rs.5 lacs = Rs.3.2 lacs or Rs.5 lacs = Rs.5 lacs

 

b) Maximum value of supply of services & Goods that can be provided u/s 10(2A) = Rs.50 lacs

 

4. Comment for composition levy

a) Eligibility of Parikh u/s 10(1)

i) AT of Parikh for FY 2019-20 is less than Rs.1.5 cr, hence he satisfied 1^st condition

ii) Max Value of supply services that can be provided by it u/s 10(1) = Rs.5 lacs

iii) Parikh cannot opt for composition levy u/s 10(1) as value of supply of services is more than Rs.5 lacs

 

b) Parikh can opt alternative composition levy u/s 10(2A) as its AT is less than Rs.50 lacs

as per section 10(2A), he cannot issue tax invoice and he cannot avail ITC.

 

Question-2 [ICAI-F-N18-O-4b-4]

M/s. Ranveer Industries, registered in Himachal Pradesh, is engaged in making inter-State supplies of readymade garments. The aggregate turnover of M/s. Ranveer Industries in the financial year 2016-17 is Rs.70 lakh. It opted for composition levy in the year 2017-18 and paid tax for the quarter ending September, 2017 under composition levy.

The proper officer has levied penalty for wrongly availing the scheme on M/s. Ranveer Industries in addition to the tax payable by it.

Examine the validity of the action taken by proper officer.

 

Question-3 [ICSI-P-D19-5a-3]

State with reasons whether the following suppliers are eligible to avail composition levy when their turnover in the preceding financial year does not exceed Rs.1.5 crore :

(i) Joint Products, whose registered office is located in Chennai and supplies goods to dealers in Andhra Pradesh and Pondicherry.

(ii) Kumar Traders who are engaged in trading of ice-creams in Karnataka and having registration in Karnataka.

(iii) Shankar Bhavan providing restaurant services in Jaipur a notified tourist centre.

 

Question-4 [ICSI-P-D20-1c-5]

Examine the correctness or otherwise of the following statements in accordance with the provisions of GST Act, 2017 and support your answer by giving brief reasons:

(i) The composition scheme will not be an optional scheme.

(ii) A taxable person having same PAN can opt to pay tax under composition scheme by seeking separate registration for branches.

(iii) A taxable person will be eligible to opt for composition scheme only for one out of the three or more business verticals.

(iv) Composition scheme can be availed, where the taxable person effects interstate supplies.

(v) Composition tax can be collected from the customers.

 

Question-5 [ICSI-P-J22-2b-5]

Lalit Industries, registered in Assam, is engaged in making inter-state supplies of hosiery garments. The aggregate turnover of Lalit Industries in the preceding financial year is Rs.72 Lakh. It has opted for composition levy under Section 10(1) and 10(2) of CGST Act, 2017 in the current financial year and paid tax for the April-June quarter of current year under composition levy. The proper officer has levied penalty for wrongly availing the scheme on Lalit Industries in addition to the tax payable by it.

Justify, in the context of provision of CGST Act, 2017 the validity of the action taken by proper officer.

 

Question-6 [ICSI-E-J22-78-1]

Which out of the following statements is TRUE regarding Composition Scheme in CGST Act, 2017

(A) Composition scheme is compulsory

(B) The taxable person under composition scheme can collect tax from recipients at nominal rate

(C) Composition dealer may effect interstate supplies

(D) Composition dealer issues Bill of Supply rather than Tax Invoice

 

Question-7 [ICSI-E-D21-78-1]

Section 10 of the CGST Act, 2017 contains the provisions regarding composition levy with the objective to bring simplicity and to reduce the compliance cost for the small tax payers. State which out of the following statements is not correct for a tax payer who has opted for composition scheme

(A) A registered person supplying goods under the composition scheme shall issue a bill of supply and cannot raise tax invoice

(B) Last day of payment of liability towards tax, interest, penalty, fees or any sum is 18th day of the month following each quarter

(C) Last date of payment of liability towards tax, interest, penalty, fees or any sum is 20th day of each month

(D) A composition dealer 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.

 

Question-8 [ICMAI-F-J19-2b-6]

M/s Samson Ltd being a trader of laptops has two units, one in Chennai and other in Mumbai.

Place                       PY Turnover (Rs. in lacs) (Excluding tax)

Chennai                             52

Mumbai                              12

You are required to answer the following:

(i) Is M/s Samson Ltd eligible for composition levy in the current year?

(ii) If so, can M/s Samson Ltd opt composition scheme for Chennai Location and normal scheme for Mumbai?

(iii) Whether need to give separate intimations for opting composition scheme in each state?

 

Question-9 [ICAI-F-Ch3-6]

B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of a taxable product ‘P’ and product ‘Q’ exempt by way of a notification. The firm supplies these products only in the eastern part of Maharashtra. All the procurements (both goods and services) of the firm are from the suppliers registered under regular scheme in the State of Maharashtra. The firm pays tax under composition scheme.

B & D Company has furnished the following details with respect to its turnover (exclusive of taxes):

Particulars	Turnover for the quarter ended 30th June (Rs.)	Turnover for the quarter ended 30th Sep (Rs.)
P	60,00,000	50,00,000
Q	17,65,000	17,00,000

The extract of the only bill book maintained by the firm showed the following details

Bill No	Date	Taxable Value (P)	Taxable Value (Q)
2306	1st Oct	2,00,000	3,000
2307	1st Oct	1,36,000	2,250
2308	2nd Oct	67,000	39,250
2309	3rd Oct	58,750	33,750
2310	5th Oct	1,00,000	-
2311	6th Oct	94,000	6,000
2312	6th Oct	-	17,000
2313	8th Oct	50,000	6,000
2314	9th Oct	60,000	9,000

 

Further, B & D Company paid freight of Rs.1,40,000 to Goods Transport Agency during the April to October. Assume equal amount of freight is paid each month on the 10th day of month. Also, assume that the goods for which the freight is paid on 10 thday of the month transported between 11th to 20th day of the month.

All the above amounts are exclusive of taxes, wherever applicable. Compute the GST liability (ignoring ITC provisions) of B & D Company for the period April to October under composition scheme u/s 10(1) and (2) 10 showing calculations for each quarter separately.

Note: Make suitable assumptions wherever required. Rate of CGST and SGST on service of transportation of goods by GTA is 2.5% each. Stock is valued at cost price.