The option exercised by a registered person to pay tax under the composition scheme shall remain valid so long as he satisfies all the conditions specified in the law. The option is not required to be renewed.
(FAQ 43: MSME)
What is the effective date of composition levy
There can be three situations with respective effective
dates as shown below:
- Persons who have been granted provisional – 1st July, 2017.
registration and who opt for composition levy
(Intimation is filed under Rule 3(1) in
FORM GST CMP-01) - Persons opting for composition levy at the ti – Effective date of
me of making applications for new registration registration;
in the same registration application itself Intimation shall be
(The intimation under rule 3(2) in FORM considered only after the
GST REG-01) grant of registration and
his option to pay tax under
composition scheme
shall be effective from the
effective date of
registration - Persons opting for composition levy after – The beginning of the next
obtaining registration (The financial year.
intimation is filed under Rule
3(3) in FORM GST CMP-02)
(FAQ 42: MSME)
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 other States
No. An intimation that composition scheme has been availed in one State shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number in other States.
(FAQ 41: MSME)
How would a manufacturer under the composition scheme who receives inputs or input services from an unregistered person pay GST? What will be the tax rate if the purchase is from a person availing composition
GST will have to be paid on inputs and input services received by such manufacturer under reverse charge at normal rates and not at the composition rates. Purchase from a person under the composition scheme is purchase from a registered person and hence will not attract tax under reverse charge under section 9(4) of the CGST Act, 2017. Any person migrating from the existing law to a composition scheme and holding stock of goods purchased from unregistered persons is required to pay tax on such goods.
(FAQ 40: MSME)
How is a manufacturer under the composition scheme required to bill his supply? Can a registered person, who purchases goods from a composition manufacturer take input tax credit
A manufacturer opting to pay tax under the composition scheme cannot issue a tax invoice to his buyer but would issue a Bill of Supply. He cannot collect
any tax supplies made by him on his Bill of Supply and is required to show only the price charged for the supply. Consequently, the registered person buying goods from a composition manufacturer cannot take input tax credit.
(FAQ 39: MSME)
Can a person who has opted to pay tax under the composition scheme avail Input Tax Credit on his inward supplies
No, a taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take input tax credit on the supplies received.
(FAQ 38: MSME)
For the purpose of availing composition how will aggregate turnover be computed for the purpose of composition
Aggregate turnover shall be computed on the basis of turnover on all India basis. It includes aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number but excludes GST and cess.
(FAQ 37: MSME)
A person availing composition scheme during a financial year crosses the turnover of Rs. 75 Lakhs / Rs. 50 Lakhs during the course of the year i.e. say, he crosses the turnover of Rs. 75 Lakhs/Rs. 50 Lakhs in December? Will he be allowed to pay tax under composition scheme for the remainder of the year i.e. till 31st March
No. The option to pay tax under composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs. 75 Lakhs/ 50 Lakhs. Once he crosses the threshold, he shall file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event. He shall also furnish a statement in FORM GST ITC-01 containing details of the stock of inputs and capital goods as per the rules in this regard. This would help him join the input tax credit chain and avail credit of tax that he has paid on his inputs/goods lying in stock on the day he crosses over.
(FAQ 36: MSME)
When will a registered person have to pay tax
A registered person will have to pay GST on monthly basis on or before 20th of the succeeding month and if he has opted for composition levy he will have to pay GST on a quarterly basis on or before the 18th day of the month after the end of the quarter.
(FAQ 35: MSME)
Are all manufacturers eligible for composition scheme
A manufacturer is eligible to avail composition scheme except manufacturers:
(a) whose aggregate turnover in the preceding financial year crossed Rs. 75 lakhs;
(b) who have purchased goods or services from unregistered suppliers unless they have paid GST on such goods or services on reverse charge basis;
(c) who make any inter-State outward supplies of goods;
(d) who make supply of goods through an electronic commerce operator;
(e) who manufacture the following goods.
1. Ice cream and other edible ice, whether or not containing cocoa
2. Pan masala
3. Tobacco and manufactured tobacco substitutes.
(FAQ 34: MSME)