Composition Levy – Eligibility, Rate of taxation and Limitation

Composition Levy GST –  Eligibility, Rate of taxation and Limitation

EligibilityIn case of Supply of Goods – As per Section 10 of GST Law, a registered taxable person whose aggregate turnover in the preceding financial year did not exceed Rs 1.5 Crore or 75 lakh in case of specified states then he has an option to pay tax under composition levy instead of Normal tax regime. CBIC has increase the threshold limit to 1.5 Crore from earlier limit of Rs 1 Crore with effect from 1st April 2019 (Notification No. 14/2019 dated 7-3-2019 –Central Tax). However, a composition dealer can also engaged in supply of services to the extent of 10 percent of turnover or Rs 5 Lakh, whichever is higher from 1st February 2020

Eligibility – In case of Supply of Service :- A Registered taxable person who is not eligible as mention above and whose aggregate turnover in the preceding Financial year did not exceed Rs 50 Lakhs can pay tax under composition levy.

Rate of tax under composition Levy – In case of Manufacture and Traders 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 (Restaurant Services) rate of tax is Five percent and Six percent in any case of  service provider.

Type of Business CGST SGST Total
Manufacture and Traders 0.50% 0.50% 1.00%
Restaurant and Serving Alcohol 2.50% 2.50% 5.00%
Other Service Provider 3.00% 3.00% 6.00%

 

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 (See exception above)

2.  Taxable person who makes any inter – State supplies of Goods or Services.

3.  Supply of Goods or services through Electronic commerce operator who is required to collect tax at source.

4.  A non resident taxable person or casual taxable person

5.  Any supply of goods or services which are not leviable to tax under the act

5.  Not a manufacturer of goods or services as notified by the Government. For this purpose Government is notified the manufacturer of ice-cream, Tabacco and Pan masala.

Composition Scheme application : –  For applied for composition scheme, taxpayer has to file GST CMP – 02. GST CMP – 02 is to be filled through online by logging into the GST Portal and it’s should be filed at the beginning of every financial year.

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

1.  If a taxable person want to go with composition scheme, 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 threshold limit.

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, have to any normal tax that may be payable by him under other provisions of this Act and such person is also liable to a penalty.

Also See, “Job work provision under GST

 

For any query you can write at taxhouseindia@gmail.com. Before making any decisions do consult with your professional or tax advisor.

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