GST- COMPOSITION

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A registered person whose aggregate turnover in the preceding financial year did

not exceed Rs. 50 lacs may opt for composition scheme upto the day on which

his aggregate turnover during the current financial year exceeds Rs. 50 Lacs

Person opting for this scheme shall pay prescribed amount in lieu of tax

– In case of manufacturer, such amount shall not exceed 1% of turnover (CGST) + 1

% of turnover (SGST/UTGST).

– In case of Restaurant Service Providers, such amount shall not exceed 2.5 % of

turnover (CGST) + 2.5 % of turnover (SGST/UTGST).

– In other cases (say traders), such amount shall not exceed 0.5 % of turnover (CGST)

+ 0.5 % of turnover (SGST/UTGST).

The above amount shall be subject to prescribed conditions & restrictions

The composition supplier not to collect any tax from the recipient of supplies.

Composition supplier not entitled to any credit of input tax

No Input tax credit allowed to the recipient on the amount (tax) paid under

composition

Tax to be paid under Composition

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Eligibility to opt for composition based on ‘aggregate turnover’

Present limit of aggregate turnover is Rs. 50 Lacs

The Government may by Notification increase this limit of 50 lacs to an amount

not exceeding Rs. 1.00 crores.

Definition of an aggregate turnover : “aggregate turnover” means

the aggregate value of

– all taxable supplies (excluding the value of inward supplies on which

tax is payable by a person on reverse charge basis),

– exempt supplies, exports of goods or services or both and

– inter-State supplies of persons having the same Permanent Account

Number,

– to be computed on all India basis

but excludes CGST, SGST/UTGST, IGST and GST Compensation Cess; -

What is Aggregate Turnover

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Definition of exempt supplies : “exempt supply” means

– supply of any goods or services or both

– which attracts nil rate of tax or

– which may be wholly exempt from tax under section 11 of CGST Act

(Power to Grant Exemption from tax), or under section 6 of the Integrated

Goods and Services Tax Act,

– and includes non-taxable supply;

What is Exempt Supply

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The registered person shall be eligible to opt for composition if following

conditions are met

– In case of supplier he should be engaged in the supply of services

mentioned in clause (b) of paragraph 6 of Schedule II; (Restaurant

Services)

– he is not engaged in making any supply of goods which are not leviable to

tax under this Act;

– he is not engaged in making any inter-State outward supplies of goods;

– he is not engaged in making any supply of goods through an electronic

commerce operator who is required to collect tax at source under section

52; and

– he is not a manufacturer of notified goods:

Person taking composition shall either take composition in all of its units or pay tax inregular course for all the units.

Conditions for opting composition

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he is neither a casual taxable person nor a non-resident taxable person;

the 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 under sub-rule (1) of rule 1;

the goods held in stock by him have not been purchased from an unregistered

supplier and where purchased, he pays the tax under sub-section (4) of section 9;

he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward

supply of goods or services or both;

he was not engaged in the manufacture of notified goods, during the preceding

financial year;

The day any of the conditions breaks, supplier will be liable for regular tax

within seven days to file an intimation for withdrawal from scheme in form GST

CMP-04.

In case of voluntarily withdrawal, the above application to be filed prior to the

date of withdrawal from composition

Additional Conditions for opting

composition (under Rules)

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For opting composition, the supplier has to intimate department prior to the

financial year for which he wish to take composition in GST CMP-02.

Once such intimation is filed for one financial year, Fresh intimation for

every year need not be filed.

If a person opts the composition at the time of registration only, he may give

intimation for composition in PART B of form GST REG-01.

If a person shifts for composition from the appointed day he has to file Form

GST CMP-01 within 30 days from the appointed day

Formalities for Composition Registration

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Document for Supply

A registered paying tax under the provisions of section 10 shall issue, instead of a tax

invoice, a bill of supply [ section 31(3)(c)]

he shall mention the words “composition taxable person, not eligible to collect tax on

supplies” at the top of the bill of supply issued by him; [Rule 3 (1) (f)]

Display Conditions

The dealer shall mention the words “composition taxable person” on every notice or

signboard displayed at a prominent place at his principal place of business and at every

additional place or places of business. [Rule 3 (1) (g)]

Document for Supply & Display conditions

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Return

A registered person paying tax under the provisions of section 10 shall, for each quarter

or part thereof, furnish, in such form and manner as may be prescribed, a return,

electronically, of turnover (Form GSTR-4) in the State or Union territory, inward

supplies of goods or services or both (Form GSTR-4A), tax payable and tax paid within

eighteen days after the end of such quarter. [Section 39 (2)]

Non-filing of Return

The proper officer may cancel the registration of a person from such date, including

any retrospective date, as he may deem fit, where, a person paying tax under section 10

has not furnished returns for three consecutive tax periods; [Section 29 (2) (a) ]

Returns

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Availability of credit in special circumstances. (Transfer from Composition to

Regular)

Subject to such conditions and restrictions as may be prescribed

- where any registered person ceases to pay tax under section 10,

- he shall be entitled to take credit of input tax in respect of

- inputs held in stock,

- inputs contained in semi-finished or finished goods held in stock and

- on capital goods

- on the day immediately preceding the date from which he becomes liable to pay

tax under section 9:

Provided that the credit on capital goods shall be reduced by such percentage points

as may be prescribed; [Section 18 (1)(c)]

Availability of credit in special circumstances

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Availability of credit in special circumstances. (Transfer from Regular to

Composition)

Where any registered person

– who has availed of input tax credit opts to pay tax under section 10 or,

– where the goods or services or both supplied by him become wholly exempt,

– he shall pay an amount, by way of debit in the electronic credit ledger or electronic

cash ledger, equivalent to the credit of input tax in respect of

– inputs held in stock and

– inputs contained in semi-finished or finished goods held in stock and

– on capital goods, reduced by such percentage points as may be prescribed,

– on the day immediately preceding the date of exercising of such option or, as the

case may be, the date of such exemption:

Provided that after payment of such amount, the balance of input tax credit, if any, lying

in his electronic credit ledger shall lapse. [Section 18 (4)]

Availability of credit in special circumstances

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Transitional Provisions (Composition to Regular dealer)

A registered person, who was either paying tax at a fixed rate or paying a fixed amount

in lieu of the tax payable under the existing law shall be entitled to take, in his electronic

credit ledger, credit of eligible duties in respect of inputs held in stock and inputs

contained in semi-finished or finished goods held in stock on the appointed day subject

to the following conditions, namely:––

i. such inputs or goods are used or intended to be used for making taxable supplies

under this Act;

ii. the said registered person is not paying tax under section 10;

iii. the said registered person is eligible for input tax credit on such inputs under this

Act;

iv. the said registered person is in possession of invoice or other prescribed

documents evidencing payment of duty under the existing law in respect of inputs;

and

v. such invoices or other prescribed documents were issued not earlier than twelve

months immediately preceding the appointed day.

Transitional Provision – Sections 140 (6)

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Forms prescribed in Composition Rules

Form No. Purpose Time Limit

GST CMP 01 Intimation to pay tax under section 10

(Only for persons registered under the

existing law migrating on the

appointed day)

Prior to the appointed day but not later

than 30 days after the appointed date

GST CMP 02 Intimation to pay tax under section 10

(For persons registered under the Act)

Prior to commencement of FY for which

option to pay tax arises

GST CMP 03 Intimation of details of stock on date

of opting for composition levy

within sixty days of the date from which

the option for composition levy is

exercised

GST CMP 04 Intimation/Application for withdrawal

from composition Levy

Before the date of withdrawal file this

form

GST CMP 05 Notice for denial of option to pay tax

under section 10

GST CMP 06 Reply to the notice to show cause Within 15 days of receipt of notice in

form GST CMP 05

GST CMP 07 Order for acceptance / rejection of

reply to show cause notice

Within 30 days of receipt of reply in form

GST CMP 06

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Thank You

Rohini Aggarawal

Email: rohini@cia-llp.com

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