Frequently Asked Questions on Composition Levy under GST dated 05-07-2017
General FAQ on GST – GST Frequently Asked Questions (FAQs)
GST
Q1. 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 ` 75 lakhs (` 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.
Q2. 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, Tobacco products etc.)
2% (1% Central tax plus 1% State tax) of the turnover
2.
Restaurant Se
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bsp; a casual taxable person or a non-resident taxable person;
(b) suppliers whose aggregate turnover in the preceding financial year crossed ` 75 lakhs;
(c) supplier who has purchased any goods or services 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. N
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ch his aggregate turnover during the financial year exceeds the specified limit (` 75 lakhs/` 50 lakhs). He is required 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.
Q7. 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 a
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. No. He can issue a bill of supply in lieu of tax invoice.
Q11. 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.
Q12. 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.
Q13. 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 tax
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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.
Q17. 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.
Q18. Can t
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s 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
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ation 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.
Q23. 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 Q4 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 mentio
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, within a period of thirty days of withdrawal.
Q26. 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 c
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hat 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.
Q31. 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.
Q32. A registered person has excess ITC of ` 10,000/- in his last VAT return
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