GST (Goods & Services Tax)
Composition Levy Scheme
in GST
Introduction • The value of inward supplies on which tax is payable by a person
The Composition levy scheme is a very simple, hassle free compliance on reverse charge basis &
scheme for small taxpayers. It is a voluntary and optional scheme. • Taxes including cess paid under GST law.
Benefits of composition scheme CBEC vide Order No. 01/2017-Central Tax dated 13th October, 2017
• Easy compliance as no elaborate accounts and records to be has clarified that a person suppling any exempt services including
maintained services by way of extending deposits, loans or advances in so far
• Simple Quarterly Return as the consideration is represented by way of interest or discount,
• Quarterly payment of tax shall not be ineligible for the composition scheme. In computing
his aggregate turnover in order to determine his eligibility for
Provisions related to composition levy have been provided under composition scheme, value of supply of the exempt services
section 10 of the Central GST Act, 2017 and Chapter 2 of the CGST including services by way of extending deposits, loans or advances
Rules, 2017. Under this scheme, a registered taxable person, whose shall not be taken into account.
aggregate turnover does not exceed Rs. One crores (Rs. 75 lakhs for
special category States except J & K and Uttrakhand) in the financial Registration and intimation under the scheme.
year 2016-17 may opt for this scheme. Registration under GST law is compulsory for opting for the
Composition scheme. A person who is registered under existing
A taxpayer registered under composition levy scheme has to pay an laws and has obtained a provisional registration under GST has
amount equal to certain fixed percentage of his annual turnover as to file an electronic intimation in the FORM GST CMP-01 on the
tax to the government. This tax has to be paid on quarterly basis. common portal (www.gstn.gov.in). He can file this intimation either
Such taxpayer does not have to maintain elaborate accounts and before the appointed day (i.e. day on which GST came into force
records and instead of two monthly statements and a return (which 01/07/2017) or within 30 days (or as extended by the commissioner)
a normal taxpayer has to file under GST), he has to file a simple of the appointed day (01/07/2017), (which was later extended up to
quarterly return in FORM GSTR-04. The time Limit for GSTR-4 for 16/08/2017).
the quarter July to September, 2017 has been extended to 24th
December, 2017 vide Notification No. 59/2017-CGST. If he intimates after the appointed day, he shall not collect GST and
issue bill of supply from the appointed day. Further such person
However, upon opting for this scheme, he cannot issue taxable
invoice under GST law and can neither collect GST from his customers Supply
has to furnish a statement containing details of stock including the
inward supply of goods received from unregistered persons, held
nor can claim Input Tax credit on his purchases by him on the day preceding the date from which he opts for the
scheme, in FORM GST CMP-03, within 60 days (or as extended by the
Method to calculate Aggregate Turnover commissioner) of the date from which the option for composition
Aggregate turnover is computed on all India basis for a person levy is exercised. As per Order No. 11/2017-GST dated 21.12.2017, the
having same Permanent Account Number (PAN). It is sum of value period for intimation of details of stock in FORM GST CMP-03 is
of all outward supplies falling in the following four categories: extended till 31st January, 2018
A person who is not registered under existing law but applies for
• Taxable supplies fresh registration under Rule 8 of the CGST Rules, 2017 may opt for
• Exempt supplies the scheme by providing necessary information under part B of
• Exports of goods or services or both FORM GST REG-01.
• Inter-state supplies, but excludes
Any registered person who wants to opt for composition levy has
Directorate General of Taxpayer Services
CENTRAL BOARD OF EXCISE & CUSTOMS
www.cbec.gov.in
GST (Goods & Services Tax)
Composition Levy Scheme
in GST
to file an electronic intimation in the FORM GST CMP-02 prior to are not taxable under GST law
the commencement of financial year for which the option to pay
tax under composition levy is exercised and also has to a furnish a vi. A person engaged in supply of goods through an Electronic
statement in FORM GST ITC-03 in accordance with the sub rule (4) of Commerce Operator (ECO) who is required to collect Tax at source
Rule 44 of CGST Rules, 2017, within 90 days from the commencement under section 52 of the CGST Act.
of the relevant financial year.
vii. The goods held in stock by him on the appointed day have not
A person having a single PAN and registered in more than one been purchased
State under GST can opt for the scheme, provided he meets all the
conditions of the scheme, only if all such registered persons opt for in the course of inter-State trade or commerce or imported from
the Composition scheme. A registered person cannot choose to opt a place outside India or received from his branch situated outside
for the Composition scheme in one state and not in other states. the State or from his agent or principal outside the State where
Further, an intimation for withdrawal from the scheme; or denial of registration under the Composition Scheme has been taken.
the scheme with respect to any one registered person under the
same PAN will be applicable for all such registered persons. viii. The goods held in stock by him have not been purchased from
an unregistered
Effective Date for composition levy supplier and where purchased, he pays the tax under the reverse
Effective date for the taxpayers who are already registered under charge mechanism.
the existing laws and obtained provisional registration under GST
law and intimates about opting for the scheme either before the ix. A person engaged in manufacturing of goods notified under
appointed day (01/07/2017) or within 30 days (or as extended) of the sec 10 (2) (e) of the CGST Act either in the year 2016-17 or later.
appointed day, shall be the appointed date. Following goods have been notified for which composition scheme
Effective date for registered taxpayer who intimates about opting is not available.
for the scheme under FORM GST CMP-02, shall be the beginning of
the financial year S.No. Classification(Tariff Description
Effective date for a person who applies for fresh registration under
item/Chapter)
Rule 8 of the CGST Rules, 2017 by providing necessary information
under part B of FORM GST REG-01, shall be the effective date of 1 2105 00 00 Ice cream and other edible
registration as per sub rule 2 or 3 of Rule 10 of CGST Rules, 2017. ice, whether or not containing
cocoa
Persons who are not eligible for the scheme. 2 2106 90 20 Pan masala
Barring few exceptions, all registered taxable persons whose
aggregate turnover has not exceeded Rs. One crore (Rs. 75 lakhs for 3 24 Tobacco and manufactured
special category states except J & K and Uttrakhand) in the financial tobacco substitutes
year 2016-17 are eligible to opt for this scheme. List of taxable
persons who are not eligible for the scheme is as below: Rate of Tax under the scheme
There are three rates prescribed for three different categories of
i. A casual taxable person i.e. a person who occasionally undertakes suppliers.
supplies in a State or Union Territory where he has no fixed place of
business. • An eligible Manufacturer has to pay 2% (1% CGST and 1% SGST/
UTGST) of turnover in a state or Union Territory, as the case may
ii. A non-resident Taxable person i.e. a person who occasionally be.
undertakes supplies but has no fixed place of business or residence
in India. • An eligible person engaged in making supplies mentioned in
clause (b) of para 6 of Schedule II of the CGST Act (supplier of
iii. A supplier of services except a person engaged in supply of restaurant Service) has to pay 5% (2.5% CGST and 2.5% SGST/UTGST)
restaurant service. of turnover in a state or Union Territory, as the case may be.
iv. A person engaged in providing inter-state supply of goods.
• An eligible person engaged in any other supply has to pay 1%
v. A person engaged in supply of non-taxable goods i.e. goods which (0.5% CGST and 0.5% SGST/UTGST) of turnover in a state or Union
Prepared by: National Academy of Customs, Indirect Taxes & Narcotics
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GST (Goods & Services Tax)
Composition Levy Scheme
in GST
Territory, as the case may be. • He contravenes eligibility criteria or any of the conditions of the
scheme
Bill of Supply
A taxable person opting for the scheme has to issue bill of supply as Withdrawal from the composition levy scheme and procedure
he is not eligible to issue taxable invoice under GST. He has to mention thereafter.
the words “composition taxable person, not eligible to collect tax on A registered person who intends to withdraw from the scheme has
supplies” at the top of every bill of supply issued by him. to file an intimation for withdrawal from the scheme in the FORM
GST CMP-04, before the date of such withdrawal. A registered
Conditions & Restrictions under the scheme person who ceases to satisfy any provision of the scheme has to
A person opting for the scheme has to adhere to the following file an intimation for withdrawal from the scheme in the FORM GST
conditions CMP-04, within 7 days of occurrence of such event. After opting out
of the scheme, he has to pay tax as normal tax payer and issue tax
• Issue bill of supply in the prescribed manner invoice for every taxable supply made thereafter
• Pay all taxes on purchases including taxes to be paid on reverse
charge basis Subsequently he has to forward a statement in FORM GST ITC-01
• Don’t claim input tax credit of purchases containing details of the stock of the inputs and inputs contained
• Mention the words “composition taxable person” on every notice in semi-finished or finished goods held in stock by him on the date
board or signboard displayed at the prominent place at his every place on which the option is withdrawn. The said statement has to be
of business. submitted on the common portal within 30 days from the date of
withdrawal. He shall be entitled to take credit of input tax in respect
• Where ever a person, registered under any of the existing laws, and of inputs held in stock, inputs contained in semi-finished or finished
who has been given provisional registration, gives an intimation for the goods held in stock and on capital goods on the day immediately
composition scheme, he shall not be allowed the composition scheme preceding the date from which he becomes liable to pay tax as
in case the goods held in stock by him on the appointed day have been normal taxpayer under section 9 of the CGST Act, 2017.
purchased in the course of inter-State trade or commerce or imported
from a place outside India or received from his branch situated outside Action for wrongly opting the scheme or for contravention of any
the State or from his agent or principal outside the State. provision of the scheme
In the scenario, when the proper officer has reason to believe that
• Withdraw from the scheme if not eligible the registered person has wrongly opted for the scheme or he has
contravened the provisions of the scheme, then he will seek a reply
Validity of the composition levy scheme by issuing a show cause notice to such person in the FORM GST
A person opting for the composition levy scheme can continue to pay CMP-05. This notice is to be replied within 15 days of receipt of the
tax under the said scheme as long as he satisfies the eligibility criteria same. Thereafter within 30 days of receipt of reply, officer has to
and conditions related to the scheme and do not require to file a fresh issue an order in FORM GST CMP-07, either accepting the reply or
application every year. But, such a person shall be liable to pay tax denying the option to pay tax under the scheme.
under sub-section (1) of section 9 of the CGST Act, 2017 from the day
he ceases to satisfy any of the conditions and shall issue tax invoice Subsequently the registered person who has been denied the
for every taxable supply made thereafter and he shall also file an option to pay tax under the scheme has to forward a statement in
intimation for withdrawal from the scheme. FORM GST ITC-01 containing details of the stock of the inputs and
inputs contained in semi-finished or finished goods held in stock by
Conditions which may render a person in-eligible for the scheme him on the date on which the option is denied. The said statement
A person is in-eligible for the scheme, if has to be submitted on the common portal within 30 days from the
date of denial order passed in the FORM GST CMP-07.
• He wrongly opts for the scheme.
The delinquent taxpayer will be liable to pay the due tax and penalty.
• His turnover exceeds Rs. One crore (In the case of 9 North East and However, no adverse action will be taken without following the
special category states, namely Arunachal Pradesh, Assam, Manipur, principles of natural justice.
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh,
the limit of turnover is Rs. 75 Lakhs in the preceding financial year)
Prepared by: National Academy of Customs, Indirect Taxes & Narcotics
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