Category: Composition Levy

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Whether a supplier of services is eligible to pay tax under composition scheme

No, a supplier of services is not eligible to opt for composition scheme. However, a supplier supplying composite supply involving supply of service or goods being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) is eligible to opt for payment of taxes under composition scheme.

(ICAI FAQ PUBLICATION 06-09-2017 COMPOSITION LEVY: FAQ NO. 55)

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Can every taxable person opt to pay tax under composition scheme

No, the registered person whose aggregate turnover in the preceding financial year does not exceed seventy-five lakh rupees (subject to fifty lakh rupees in case of specified states as prescribed under Notification 08/2017-Central Tax, dated 28.06.2017), may opt to pay tax subject to satisfaction of the following conditions:
1. he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II (Restaurant Services);
2. he is not engaged in making any supply of goods which are not leviable to tax under this Act (like petrol, diesel, alcohol liquor for human consumption, etc.);
3. he is not engaged in making any inter-State outward supplies of goods;
4. he is not engaged in making any supply of goods through an electronic
commerce operator who is required to collect tax at source under section 52; and
5. he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council:
However, manufacturers of ice cream, pan masala, tobacco and tobacco substitutes are not eligible for composition scheme.

(ICAI FAQ PUBLICATIONS 06-09-2017 COMPOSITION LEVY: FAQ NO. 54)

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What is the rate of tax applicable to a taxable person opting to pay tax under composition scheme

Section 10(1) of the CGST Act, 2017 prescribes, subject to such conditions and
restrictions as may be prescribed, that the rate of tax shall not exceed:
1. one per cent of the turnover in State or turnover in Union territory in case of a manufacturer;                                                                                                                                       2. two and a half per cent, of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II; and
3. half per cent, of the turnover in State or turnover in Union territory in case of other suppliers.

(ICAI FAQ PUBLICATION 06-09-2017 COMPOSITION LEVY: FAQ NO. 53)

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Can a person paying tax under composition scheme make supplies of goods to SEZ

No. Supplies to SEZ from domestic tariff area will be treated as inter-State supply. A person paying tax under composition scheme cannot make inter-State outward supply of goods. Thus, for making supplies to an SEZ unit, a person needs to take registration as a regular taxpayer. The supplies to SEZ will be zero rated and the supplier will be entitled to make supplies without payment of tax or if he pays tax, he will be entitled to refund of tax so paid.

(FAQ 32: COMPOSITION LEVY)