Goods and Services Tax

Frequently Asked Questions on Composition Levy under GST dated 05-07-2017

GST – General FAQ on GST – Frequently Asked Questions – 170705-01 – 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 Services 5% (2.5% Central tax plus 2.5% State Tax) of the turnover 3. Traders or any other s

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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. No. Classification (Tariff item/Chapter) Description of Goods 1. 2105 00 00 Ice cream and other edible ice, whether or not containing cocoa 2. 2106 90 20 Pan masala 3. 24 Tobacco and manufactured tobacco substitutes Note : There is no restriction on procuring goods from inter-State suppliers by persons opting for composition scheme. Q5. When will a person opting for composition levy pay tax? Ans. A person opting for composition levy will have

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n 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 as Central, State/Union Territory and Integrated taxes and cess. Q8. Can a person who has opted to pay tax under the composition scheme avail Input Tax Credit on his inward supplies? Ans. No. A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switches over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed (refer Q 6 above). Q9. Ca

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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 taxpayer under reverse charge mechanism. The tax can be paid by the 18th day of the month succeeding the quarter in which such supplies were received. The information relating to such supplies should be shown by the composition taxpayer in Table 4 of return in FORM GSTR-4. Q14. What is the form in which an intimation for payment of tax under composition scheme needs to be made by the taxable person? Ans. The intimation is to be filed electronically in FORM GST CMP-01 or FORM GST CMP-02.

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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 the option to pay tax under composition levy be exercised at any time of the year? Ans. No. The option is required to be given electronically in FORM GST CMP-02, prior to the commencement of the relevant financial year. Q19. Can a person who has already obtained registration, opt for payment under composition levy? If so, how? Ans. Yes. Such persons need to give intimation electronically in FORM GST CMP-02 but from beginning of the financial year only. Q20. What are the compliances f

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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 persons also have to furnish the statement in FORM GST ITC-03 which is a declaration for intimation of ITC reversal/payment of tax on inputs held in stock, inputs contained in semi-finished and finished goods held in stock and capital goods under Section 18(4) of the CGST Act, 2017 within a period of sixty days from the commencement of the relevant financial year. Q21. In case a person has registration in multiple States, can he opt for payment of tax under composition levy only in one State and not in ot

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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 mention the words composition taxable person on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business. Q24. What is the validity of composition levy? Ans. The option to pay tax under composition levy would remain valid so long as conditions mentioned in Section 10 of the CGST Act, 2017 and Rules 3 to 5 of the CGST Rules, 2017 remain satisfied. Q25. Can a person paying tax under composition levy, withdraw voluntarily from the scheme? If so, how? Ans. Yes. The registered person who intends to withdraw fr

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ll 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 contravention, as the case may be. Q27. In case the option to pay tax under composition levy is denied by the proper officer, can the person avail ITC on stock after denial? Ans. Yes. ITC can be availed by filing, a statement in FORM GST ITC-01 (containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock) by him on the date on which the option is denied as per order in FORM GST CMP-07, within a period of thirty days from the order. Q28. Will withdrawal intimation in any one place be applicable to all places of business? Ans. Yes. Any intimation

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