Composition Levy
GST FAQ 3rd Edition – December, 2018 – GST Frequently Asked Questions (FAQs)
GST
2.1 Composition Levy
Q 17. What is the 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 prescribed limit. The objective of composition scheme is to bring simplicity, ease compliance burden and reduce cost of compliance for the small taxpayers. The scheme is optional. It essentially provides for a turnover tax regime for such tax payers, with facility for filing of return on quarterly basis (instead of monthly return by the normal tax payers).
An eligible person opting to pay tax under the composition scheme shall, instead of paying tax on every invoice at the specified rate, pay tax at a prescribed percentage of his turnover every quarter.
Q 18. What is the rate of composition levy?
S/No.
Category of Registered person
Rate of Tax
1
Manufacturers, other than manufacturers of s
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Category States in which the turnover limit for Composition Levy for CGST and SGST purpose shall be ₹ 75 lakh?
Ans. Composition scheme is a scheme for payment of GST available to small taxpayers whose turnover in the preceding financial year did not cross Rs. One crore. In the case of following 9 states, the limit of turnover is ₹ 75 Lakhs in the preceding financial year.
a) Arunachal Pradesh
b) Assam
c) Manipur
d) Meghalaya
e) Mizoram
f) Nagaland
g) Sikkim
h) Tripura and
i) Himachal Pradesh.
Q 20. Who are the persons not eligible for composition scheme?
Ans. Following persons will not be allowed to opt for composition scheme:
a) supplier of services, other than restaurant service (Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuab
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making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and
e) a manufacturer of such goods as may be notified by the Government on the recommendations of the Council. The manufacturers of the following goods shall not be eligible for the Composition Levy:
S.No.
Classification (Tariff item/ Chapter)
Description
1
2105 00 00
Ice cream and other edible ice, whether or not containing cocoa
2
2106 90 20
Pan masala
3
24
All goods i.e. Tobacco and manufactured tobacco substitutes
Q 21. Whether service providers can apply for composition scheme?
Ans. No, the Service Providers, except provider of restaurant services, cannot apply for the scheme. At present, there is no composition scheme for service providers, except for provider of restaurant services.
However, a new proviso has been added as per the recent CGST (Amendment) Act, 2018 in order to allow them to be eligible for the scheme even if they supply se
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ver of ₹ 100 Lakhs/75 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 availed shall lapse from the day on which his aggregate turnover during the financial year exceeds ₹ 100 Lakhs/75 Lakhs. Once he crosses the threshold, he shall file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event.
Every person who has furnished such an intimation, may electronically furnish at the common portal, 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 withdrawn, within a period of thirty days from the date from which the option is withdrawn.
Q 24. How will aggregate turnover be computed for the purpose of composition scheme?
Ans. It will be computed on the basis of turnover on all India basis. “ag
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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.
Q 26. Can a registered person, who purchases goods from a taxable person paying tax under the composition scheme, take credit on purchases made from the composition dealer?
Ans. No.
Q 27. Can a person paying tax under the composition scheme issue a tax invoice under GST?
Ans. No.
Q 28. Is monthly return required to be filed by the person opting to pay tax under the composition scheme?
Ans. No. Such persons need to file quarterly returns in Form GSTR-4. The GSTR-4 needs to be filed electronically on the common portal by the 18th day of the month succeeding the quarter relating to the supplies.
Q 29. What are the basic information that need to be furnished in GSTR 4?
Ans. It should contain details of turnover in the State or Union territory, inward supplies of goods or services or both and tax payable. The
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rd supply made) & 8 (II) (of advance of reverse charge or advances for which invoice is received in current period).
Q 31. How should a person who opts in or opts out of composition scheme file returns?
Ans. Composition tax payers have to file quarterly return and Normal tax payers have to file monthly returns in GST Regime. For the taxpayers who have opted in to composition scheme and taxpayers who have opted out from the composition scheme as normal tax payer, provision to file both monthly/quarterly returns (in the interim period), has been enabled on the GST Portal.
Q 32. 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.
Q 33. What is the form in which an intimation for payment of t
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t collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day.
Q 36. What are the other compliances which a provisionally registered person opting to pay tax under the composition levy need to make?
Ans. Such persons have 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 said section, 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 ninety 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 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 und
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ated 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 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 Credit, ITC attributable to the remaining useful life will be C multiplied by 5/60. This would be the amount payable on capital goods, the payable amount would be calculated by reducing by a prescribed percentage point. 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 electronic credit ledger, or by debiting
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uation
Effective date of composition levy
Persons who have been granted provisional registration and who opt for composition levy (Intimation is filed under Rule 3(1))
The appointed date i.e 1st July, 2017
Persons opting for composition levy at the time of making application for new registration in the same registration application itself (The 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 registration. of
Persons opting for composition after obtaining registration (The intimation is filed under Rule 3(3))
The beginning of financial year the
Q 43. What are the conditions and restrictions subject to which a person is allowed to avail of composition levy?
Ans. The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:-
(a) he is neither a casu
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receding financial year;
(f) 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
(g) 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 44. What is the validity of composition levy?
Ans. The option exercised by a registered person to pay tax under section 10 shall remain valid so long as he satisfies all the conditions mentioned in the said section and under the Composition Rules.
Q 45. 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 shall, before the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or verified through electronic verification code, electronically on the com
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all submit reply in FORM GST CMP-06. Upon receipt of the reply to the show cause notice issued, 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 section 10 from the date of the option or from the date of the event concerning such contravention, as the case may be.
Q 47. 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. Every person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07, may electronically furnish at the common portal, 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, within a period of thirty days from the date of the order passed in FORM GST CMP-07.
Q 48. Will withd
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