1. Uniform rate of tax @ 1% under the scheme for manufacturers and traders
(for traders, turnover will be counted only for supply of taxable goods).
No change for composition scheme for restaurant.
2. Supply of services by Composition taxpayer upto Rs 5 lakh per annum will be allowed by exempting the same
3. Annual turnover eligibility for composition scheme will be increased to Rs 2 crore from the present limit of Rupees 1 crore under the law.
Thereafter, eligibility for composition will be increased to Rs. 1.5 Crore per annum.
Note :The changes recommended by GST Council at (3) above will be implemented only after the necessary amendment of the CGST Act and SGST Acts.
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Frequently Asked Questions on Composition Levy-CBEC
Q 1. What is composition levy under GST?
Ans.
The composition levy is an alternative method of levy of tax designed for small
taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States).
The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter,
instead of paying tax at normal rate.
Q 2. What is the specified rate of composition levy?
S. No.
|
Category of Registered person
|
Rate of Tax
|
1
|
Manufacturers, other than manufacturers of such
goods as may be notified by the Government
(Ice
cream, Pan
Masala, Tobbacco prodcuts
etc.)
|
2% ( 1% Central tax plus
1% State tax) of the turnover
|
2
|
Restaurant
Services
|
5% ( 2.5% Central tax plus
2.5% SGST)
of the turnover
|
3
|
Traders or any
other supplier
eligible for composition levy
|
1% ( 0.5% Central tax plus
0.5% State
tax) of the turnover
|
Q 3.
What is the eligibility category for opting for composition levy? Which
are the Special Category States in which the turnover limit
for Composition Levy for
Central tax and State tax purpose
shall be Rs. 50
lakhs?
Ans.
Composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate
turnover in the preceding financial
year
did not cross Rs. 75 lakhs.
In the
case of the following States, the limit
of turnover is Rs. 50 lakhs:-
a) Arunachal Pradesh
b) Assam
c) Manipur
d) Meghalaya e) Mizoram
f) Nagaland g)
Sikkim
h) Tripura
i) Himachal Pradesh
Q 4. Who are
the
persons not eligible for
composition scheme?
Ans. Following persons are not allowed to opt for
the
composition scheme:
a) a casual taxable person or a non-resident taxable person;
b) suppliers whose aggregate turnover in the preceding financial year crossed
Rs. 75 lakhs;
c) supplier who
has purchased any
goods or servcies from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis;
d) supplier of
services, other than restaurant service;
e) persons supplying goods which are
not taxable under GST law;
f) persons making any inter-State outward supplies of goods;
g) suppliers
making any supply of goods through an
electronic commerce operator who is required to collect tax at
source under section 52; and
h) a manufacturer of following goods:
S. No.
|
Classification (Tariff
item/ Chapter)
|
Descriptions
|
|
1
|
2105 00 00
|
Ice cream and other edible ice, whether or not containing cocoa
|
|
2
|
2106 90 20
|
Pan masala
|
|
3
|
24
|
Tobacco and manufactured tobacco substitutes
|
|
Note: There
is
no restriction on
procuring goods
from inter-state
suppliers by persons opting for the
composition scheme
Q 5. When
will a person opting for
composition levy pay tax?
Ans. A person opting for composition levy will have to pay tax on quarterly basis before
18th of the month succeeding the quarter during which
the supplies were made.
Q 6.
A person availing composition
scheme during a financial year crosses the turnover of Rs.75 lakhs/50 lakhs during the course of the year i.e. say he crosses the turnover of
Rs.75 lakhs/50 lakhs in December?
Will he be allowed to pay tax under composition scheme for the remainder of the year
i.e. till 31st March?
Ans.
No. The option to pay tax under composition scheme lapses
from the day on which his
aggregate turnover during the financial year exceeds the specified limit (Rs. 75 lakhs /
Rs. 50 lakhs). He is rqeuired to file an intimation for withdrawal from
the
scheme in FORM GST CMP-04 within
seven days from
the day on which the threshold limit has
been crossed.
However, such person shall be allowed to avail the input tax credit in respect of the stock of
inputs and inputs contained in semi-finished or finished goods held in stock by him and on capital goods held by him on the date of withdrawal and furnish a statement within 30
days of withdrawal containing the details of such stock held in FORM GST ITC-01 on the
common portal.
Q 7.
How
will
the aggregate turnover
be
computed for the purpose of composition?
Ans.
Aggregate turnover will be computed on the basis of turnover on an all India basis
and
will include value of all taxable supplies, exempt supplies and exports made by all persons with same PAN, but would exclude inward supplies under reverse charge as well as central, State/Union Territory and Integrated taxes and cess.
Q 8. Can a person who has opted to pay tax under the composition scheme avail
Input
Tax
Credit on his inward supplies?
Ans.
No. A taxable person opting to pay tax under the composition scheme is out of the
credit chain. He cannot take credit on his input supplies.
When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be
allowed (refer Q 6 above).
Q 9.
Can a registered
person, who
purchases
goods from
a
taxable
person
paying
tax under
the
composition scheme, avail
credit
of tax paid
on purchases made from the composition dealer?
Ans.
No as the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person
paying
tax
under the composition scheme
cannot avail credit.
Q 10.
Can a person paying tax under the composition scheme issue a tax invoice under GST?
Ans. No. He can
issue a bill of supply in
lieu
of tax invoice.
Q 11.
Are monthly returns required to be filed by the person opting to
pay tax
under the composition scheme?
Ans.
No. Such persons need to electronically file quarterly returns in Form GSTR-4 on the GSTN common portal by the 18th
of the month succeeding the quarter. For example return in respect of supplies made during July, 2017 to September, 2017 is required to be filed
by 18th October, 2017.
Q 12. What are
the
basic information that need to be furnished in GSTR-4?
Ans.
It would contain details of the turnover in the State or Union territory, inward
supplies of goods or services or both
and tax payable.
Q 13.
A
person
opting
to pay
tax under
the
composition scheme receives inputs/input services from an unregistered person. Will the composition
taxpayer have to pay GST under reverse charge? If yes, in what manner?
Ans.
Yes.
Tax will have to be paid on such supplies by the composition taxpayer under reverse charge mechanism.
The tax can be paid by the 18th day of the month succeeding the
quarter in which
such supplies were received. The information relating to such supplies
should be shown by the composition taxpayer in Table 4 of return in FORM GSTR -4.
Q 14.
What is
the form
in which an
intimation for
payment
of
tax under composition
scheme needs to
be made by the taxable person?
Ans.
The intimation is to be filed electronically in FORM GST CMP- 01 or FORM GST
CMP-
02.
Q 15.
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. How
and when can he do that?
Ans.
Such a person has to electronically file a duly signed/verified intimation in FORM GST CMP-01, on the common portal, prior to 22nd June, 2017 or such further period as
may
be allowed by the
Commissioner.
Q 16.
What are the other compliances which a provisionally registered
person
opting to
pay
tax under the composition
levy need to make?
Ans.
Such person is required to furnish the details of stock, including the inward supply
of goods received from unregistered persons, held by him on the day preceding the date
from
which he opts to pay tax under the composition scheme, electronically, in FORM GST CMP-03,
on the common portal, either directly or through a Facilitation Centre notified by
the
Commissioner, within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the
Commissioner in
this
behalf.
Q 17.
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 can give the option to pay tax under the composition scheme in
Part B of FORM GST REG-01. This will be considered as an intimation to pay tax under
the
composition scheme.
Q 18.
Can the option to pay tax under composition
levy be exercised at any time of the year?
Ans.
No. The option is required to be given electronically in FORM GST CMP-02, prior
to
the commencement of the relevant financial year.
Q 19.
Can
a person who has already obtained registration, opt for payment under composition levy?
If so, how?
Ans.
Yes.
Such persons need to give intimation electronically in Form GST CMP-02 but from beginning of the
financial year only.
Q 20.
What are the compliances from ITC reversal point of view that need to be
made
by a person opting for
composition levy?
Ans.
The registered person opting to pay tax under composition scheme is required to pay an amount equal to the input tax credit in respect of inputs held in stock and inputs
conatined in semi-finished or finished goods held in stock on the
day
immediately
preceding
the
date of exercise of option.
The ITC
on
inputs shall be calculated
proportionately on the
basis of
corresponding invoices on which
credit had been availed by
the registered taxable person on such inputs.
In respect of capital goods held in stock on the day immediately preceding the date of
exercise of option, the input tax credit involved
in
the remaining useful life in months shall
be computed on pro-rata basis, taking the useful life as 5 years.
Assume
capital goods
have
been in use for 4 years, 6 months and 15 days.
The useful remaining life in months will be 5 months ignoring the part of the month. If ITC on such capital goods is taken as C,
ITC
attributable to the remaining useful life will be C multiplied by 5/60. This would be the amount payable on
capital goods.
The ITC amount shall be determined separately for integrated tax, central tax and state tax/Union territory tax. The payment can be made by debiting electronic credit ledger, if
there is sufficient balance in the said ledger, or by debiting electronic cash ledger.The
balance , if any in the electronic credit ledger would lapse.
Such
persons
also have to
furnish
the statement in FORM GST ITC-03
which
is
a
declaration for intimation of ITC reversal/payment of tax on inputs held in stock, inputs contained
in
semi-finished
and finished goods held in stock and capital
goods under
Section 18(4) of the CGST Act, 2017 within a period of sixty days from the commencement
of the relevant financial year.
Q 21.
In case a person
has
registration in multiple states? Can he opt for payment of tax under composition levy only in one state and not in other
state?
Ans. The option to pay tax under composition scheme will have to be exercised for all
States.
Q 22. What is the effective date of composition levy?
Ans. There
can
be three situations:
Situation Effective date of
composition levy
Persons who
have been granted provisional
registration and
who
opt
for composition levy (Intimation under
Rule 3(1))
|
The appointed date is
22nd June, 2017
|
Persons opting for composition levy at the time of making application for new
registration in the
same registration
application itself
(Intimation under
Rule 3(2))
|
Effective
date
of registration; Intimation
shall be considered
only
after the grant of registration and his
option to pay tax under section 10 shall be effective from the effective date of registration
|
Persons
opting for
composition after obtaining
registration (Intimation
under Rule 3(3))
|
The beginning of the financial year
|
Q 23.
What are the other conditions and restrictions subject to which a person is allowed to avail of composition scheme?
Ans.
The person exercising the option to pay tax under section 10 shall comply with the
following other conditions (in addition to what is stated in answer to Q 4 above), namely: -
a) 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; and
b) he 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.
Q 24. What is the validity of composition levy?
Ans.
The
option
to pay tax under composition levy would
remain valid so long as
conditions mentioned in section 10 of the
CGST Act, 2017 and Rule 3 to 5 of
the CGST Rules,
2017 remain satisfied.
Q 25.
Can
a
person
paying
tax under
composition levy, withdraw voluntarily from the scheme? If
so,
how?
Ans.
Yes.
The registered person who intends to withdraw from the composition scheme can file
a duly signed or verified application in FORM GST
CMP-04.
Every person who has filed an application for withdrawal from the composition scheme, may electronically furnish, a statement in FORM GST ITC-01 containing details of the
stock of inputs and inputs contained in semi-finished or finished goods held in stock by
him on the date of withdrawal, within a period of
thirty days of
withdrawal.
Q 26.
What action can be taken by the proper officer for contravention of any provisions of
composition levy and how?
Ans.
Where any contravention is observed by the proper officer wherein the registered person was not eligible to pay tax under the composition scheme or has contravened the provisions of the CGST Act, 2017 or provisions of Chapter II of the CGST Rules, 2017, he
may
issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days
of the receipt of such notice as to why the option to pay tax under the composition scheme shall not be denied.
Upon receipt of the reply to the said show cause notice in FORM GST CMP-06,
the proper
officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under the composition scheme from the date of the option or from the date of the event concerning
such contravention, as the case may be.
Q 27.
In
case the option
to pay
tax
under composition
levy
is denied
by
the proper
officer, can the person avail ITC on stock after denial?
Ans.
Yes. ITC can be availed by filing, a statement in FORM GST ITC-01 (containing
details of the
stock of inputs and inputs
contained in semi-finished
or finished goods held in stock) by him on the date on which the option is denied as per order in FORM GST CMP-
07, within a period of
thirty days from the
order.
Q 28.
Will withdrawal intimation in any one place be applicable to all places of business?
Ans.
Yes.
Any intimation or application for
withdrawal in
respect of any place
of business in any State or Union territory, shall be deemed to be an intimation in respect of
all
other places of
business registered on the
same Permanent Account Number.
Q 30. Can supplier of Services opt for composition levy?
Ans. No,
the only exception being supplier of
restaurant services.
Q 31. What are the penal consequences
if a person opts
for
the composition scheme in violation of the conditions?
Ans.
If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section
73 or 74 shall be applicable for determination of tax and penalty.
Q 32. Can a person paying tax under composition scheme make supplies of goods to SEZ?
Ans.
No. Supplies to SEZ from domestic tariff area will be treated as inter-State supply.
A person paying tax
under composition scheme cannot make
inter-State outward supply of goods. Thus, for making supplies to an SEZ unit, a person needs to take registration as a regular
taxpayer. The supplies to SEZ will be zero rated and the supplier will be entitled to
make supplies without payment of tax or if he pays tax, he will be entitled to refund of tax
so paid.
Q 33. A registered person has excess
ITC of Rs 10, 000/- in his last VAT return for
the period
immediately
preceding the
appointed
day. Under GST he
opts
for composition scheme. Can he carry forward the aforesaid
excess ITC to
GST?
Ans. No, The registered person will not be able to carry forward the excess ITC of VAT to GST
if he
opts
for composition scheme.
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