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➢ A lot of provisions have to be complied with in the GST law, which is not possible to comply with by small traders
and small manufacturers. That is why a simple scheme has been prepared for these individuals which is called
composition levy.

➢ This scheme is designed for the benefit of small dealer and small manufacturer. In this scheme, some provisions of
GST have been cut for these people. For example, low number of returns, keeping records of books and records
low compared to other dealers.

➢ Under this scheme, if a registered person whose total turnover (aggregate turnover) in the last financial year does
not exceed ₹ 150 lakh (₹ 75 lakh in specific states), he has the option to pay tax at a lower rate but does not get
any input tax credit.

The following states have been included in the specific states- Arunachal Pradesh, Assam, Nagaland, Sikkim, Mizoram,
Himachal Pradesh, Meghalaya, Tripura.

Note- Uttarakhand and Jammu and Kashmir have not been included in the list written above. This means that the total
turnover limit for availing the composition levy scheme in these states should not exceed ₹ 150 lakh.
Note: - Earlier, the upper limit of total turnover for composition levy scheme was ₹ 1 crore and for specific states ₹ 75 lakh. Central
Tax Notification No. 14/2019 dated March 7, 2019 The total turnover limit has been increased to ₹ 150 crore. However, this
notification will come into effect from April 1, 2019. The maximum total turnover limit of ₹ 75 lakh will continue for the specific states
mentioned above. However, these special category states will fix the limit of composition in their state.

The composition levy scheme is applicable from April 1, 2019

APPLICABILITY: SEC10(1)

Applicable for a registered taxable person Applicable even if there is voluntary registration

Total turnover of last financial year 1.5 Total turnover includes the value of taxable
crore (75 lakhs for 8 special category supplies, exempted and exported supplies. This
states*) does not include taxes levied under GST, the value
of inward supplies on which tax is payable by an
individual on a reverse charge basis and interest on
deposits, loans and advances. (In Aggregate
Turnover includes value of Taxable Supplies,
Exempted and Export Supplies. Does not include
Taxes levied under GST, Value of Inward Supplies on
which tax is payable by a person on reverse charge
basis and interest on deposit, loans & advances.

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application The eligibility for filing applications under this
section may change every year depending on the
turnover of the previous year.

The government has allowed manufacturers and traders to supply services worth less than 10% of the total
turnover in the state or union territory in the last financial year or ₹ 5 lakh, whichever is higher, benefiting
manufacturers or traders who can be compulsorily taxed as a part of the business. This plan consists of those
providing services.

For example, computer and laptop businesses also have to provide annual maintenance services. The composition
levy scheme for service providers is applicable from April 1, 2019.

Restrictions/Limitations (Not eligible to opt) [Sec. 10(2)]

Broadly speaking, the following five categories of registered persons are not eligible to opt for composition scheme:

(I) As per Central Tax Notification No. 2/2019, a supplier of services other than the supplier of restaurant service/for
example, a Chartered Accountant whose total turnover is from supply of services of ₹80 lakh cannot opt for composition
scheme.

(ii) Goods or services which cannot be taxed under this Act. For example, crude oil, high-speed diesel, motor sprint
(commonly known as petrol), natural gas and aviation turbine fuel;

(iii) Inter-State supplier of goods or services and as per Notification No. 2/2019 Central Tax; (iv) a person supplying goods
or services through an electronic commerce operator;

(v) Manufacturers of certain notified items such as ice cream, other edible ice (whether coca is added or not), pan masala,
all goods, tobacco and tobacco products.

Alternative Composition Scheme [Sec. 10(2A)] / Alternative structure scheme [Sec. 10(2a)]

Concessional Tax@6% for Mixed Supplier An option is provided to a registered person whose aggregate turnover in the preceding
financial year is up to 50 lakh and who is not eligible to pay tax under composition Scheme [Sec. 10(1)] to pay tax @ 3% CGST 3%
SGST on first Supplies of goods and/or services or services up to an aggregate turnover of 50 lakh made on/after 1 April in a FY,
subject to specified conditions.

Concessional tax @ 6% for mixed supplier an option is provided to a registered person whose total turnover in the
previous financial year is up to 50 lakhs and who is not eligible to pay tax under the composition scheme [section]. Subject

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to specified conditions, 3% CGST at the rate of 3% CGST on the first supply of goods and /or services up to a total
turnover of Rs. 50 lakhs made on or after 1st April in a financial year shall be taxed at the rate of 3% SGST.

LEVY AND COLLECTION OF GST Levy and collection of GSTS

Conditions: / Statuses:

1. Supplies are made by a registered person who is

• Not engaged in making any supply which is not leviable to tax under the said Act
• Not engaged in making any inter-State outward supply - neither of goods nor of services.
• Neither a casual taxable person nor a non-resident taxable person
• Not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under
section 52
• Not engaged in making supplies of notified goods, namely, ice cream and other edible ice, Pan masala, Tobacco and
manufactured tobacco substitutes.

1. The supply is made by a registered person who is

• • Does not engage in making any supplies that are not taxed under the said Act
• • Not engaging in any inter-state external supplies – neither of goods nor of services.
• • Neither casual taxable person nor non-resident taxable person
• • No one is engaged in making supplies through an electronic commerce operator, which is required to collect tax
at source under Section 52
• • Not engaging in supplying notified items, namely ice cream and other edible alternatives to ice, pan masala,
tobacco and manufactured tobacco.
2. The registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any
credit of input tax
The registered person shall not charge any tax from the recipient on the supplies made by him nor shall he be
entitled to any credit of input tax
3 . The registered person shall issue a bill of supply instead of tax invoice.
The registered person will issue a bill of supply instead of a tax invoice.

Other significant points: Other important points:

1. Where more than one registered are having the same PANGST on supplies by all such registered persons is paid @ 6%. Where
more than one registered person has the same PANGST on supply, all such registered persons are paid at the rate of 6%.

2. The registered person opting to pay GST @ 6% shall be liable to pay: 6% The registered person opting to pay GST at the rate
of Rs. 1000/- will be liable to make the payment:

• GST 6% on all outward supplies - first supplies of goods or services or both up to an aggregate turnover of 50 lakh made on
or after the 1" April in any FY-regardless of any exemption from tax available to such supplies. GST on all external

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supplies is 6% — the first supply of goods or services or both up to a total turnover of Rs 50 lakh made on or after
April 1 in any financial year — regardless of any exemption from the tax available on such supplies.
• GST on inward supplies on which he is liable to pay tax under section 9(3)/9(4) (reverse charge) at the applicable rates GST
on inward supplies on which he is liable to pay tax under section 9(3)/9(4) (reverse charge) at applicable rates.

Penal Provision in Case of Violation of the Conditions

Any person who is not eligible for composition scheme but has still paid tax under composition levy shall be liable to pay
tax under the provisions of the GST Act like a normal taxable person and shall also be liable to pay penalty equivalent to
the tax payable by him. This penalty will be in addition to the tax payable by him.

The following rule will be followed in this case:

(a) Where the appropriate officer has reasonable reason to believe that the registered person is not eligible to pay tax under
section 10 or is in contravention of the provisions of this Act, he may issue a show cause notice to such person in the
prescribed form under which the registered person has to respond within 15 days of receipt of the notice that section 10 Why not
refuse the option of paying taxes accordingly.

(b) The appropriate officer shall, within a period of 30 days from the date of receipt of the reply to the show cause notice
from the registered person, issue an order in the prescribed form in which either he may accept the reply given or he may opt
to pay tax under section 10 from the date of opting or from the date of the incident relating to such violation, Whatever the
case may be, they can refuse.

(c) However, where any registered person stops paying tax under the scheme, input tax credit will be obtained for inputs
used in stock, finished goods and semi-finished goods, capital goods before the day on which he becomes liable to pay tax
under the regular scheme.

(d) Withdrawal of composition scheme in respect of trade of any place in any State or Union Territory

Any information or application for withdrawal, in respect of all businesses registered on the same Permanent Account
Number

Information will also be considered.

Switch to normal scheme if aggregate turnover exceeds the limits of turnover

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The option to pay tax under the composition scheme expires from the day during which the registered person's total
turnover exceeds the specified limit amount. The following rules will be followed in the context of the above:

(a) The option of the registered person to pay tax under the composition scheme shall remain valid as long as he
continues to fulfil all the conditions mentioned in the tax under section 10.

(b) When a person fails to meet any of the conditions prescribed for the composition levy, he has to pay normal tax from
that day onwards and shall issue a tax invoice for every taxable supply made thereafter and shall also file a notice of exit from
the scheme within 7 days of the occurrence of such event.

(C) Any registered person who wishes to opt out of the composition scheme shall apply on the general portal, before the
date of such withdrawal.

(d) However, where any registered person stops paying tax under the scheme, the input tax on the inputs in stock on that
day, before the day on which he becomes liable to pay tax under the regular scheme, inputs used in finished goods and semi-
finished goods and capital goods (reduced by such percentage points as may be prescribed) shall be entitled to input tax
credit as per rules. Becomes entitled.

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