Composition Levy – Eligibility, Rate of taxation and Limitation

Composition Levy GST –  Eligibility, Rate of taxation and Limitation

Eligibility – As per Section 10 of GST Law, a registered taxable person whose aggregate turnover in the preceding financial year did not exceed Seventy Five lakhs then he has an option to pay tax under composition levy instead of Normal tax regime.

Rate of tax under composition Levy – In case of Manufacture rate of tax is one percent and in case of persons engaged in supplies referred to in clause (b) of paragraph 6 of Schedule II rate of tax is two and a half percent and one percent in any other case of the turnover in a state or union territory during the year.

Person not eligible for Composition Levy – Following category of taxable persons not eligible for composition Levy.

  1. Taxable person who is engaged in the supply of services or
  2. Supply of goods makes by taxable person is not leviable to tax under the Act or
  3. Taxable person who makes any inter – State supplies of Goods or
  4. Supply of Goods through Electronic commerce operator who is required to collect tax at source under section 56
  5. Manufacturer of Such Goods as may be notified.


Limitation – Limitation of Composition of Levy is as follow: –

  1. If a taxable person want to go with composition scheme, then all the registered taxable persons having the same PAN also opt to pay tax under Composition Levy. For example, if a Taxable person registered in Delhi and Same person also registered in Haryana having the same PAN then he has to opt the composition Levy for both state.
  2. Taxable person shall not be entitled to any credit of input tax.
  3. Taxable person has to pay normal tax from the day on which his aggregate turnover during a financial year exceeds fifty lakh rupees
  4. Taxable person shall not collect any tax from the recipient on supplies made by him.
  5. If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under Composition Levy, such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty and the provisions of section 66 or 67, as the case may be, shall apply mutatis mutandis for determination of tax and penalty.

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