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COMPOSITION SCHEME

who can opt for composition scheme ?

  • A registered person , whose aggregate turnover in the preceding financial year did not exceed Rs. 75 lakhs rupees can opt for composition scheme. this limit can be further increased up to Rs 1 crore.  
  • for example :-  if I have turnover in FY 2016-17 of Rs 45 lakhs and turnover in 2017-18 of Rs 80 lakhs. can I opt composition scheme in FY 2017-18?
  • Yes, as my aggregate turnover in the preceding FY i.e 2016-17 is less than 75 lakhs. however , I would not be eligible  for composition scheme in 2018-19. since my turnover for FY 2017-18 is greater than Rs. 75 lakhs.
  • such registered person should not be
  1. engaged in the supply of services other than service specified in clause (b) of para 6 of schedule I      i.e. Restaurant service
  2. Engaged in making any supply of goods which are not leviable to tax under this act.
  3. Engaged in making any inter-state supplies of goods.
  4. 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 manufacture of such goods as may be notified by the government on the recommendation of the council.

Condition for Composition Levy

  1. He is neither a causal taxable person nor a non-resident taxable person;
  2. Migration from the existing law to new law :- the goods held in stock by him on the appointed day have not been purchased in the course of inter-state trade or commerce or imported from a place outside India or received from his branch situated outside the state or from his agent or principal outside the state.
  3. the goods held in stock by him have not been purchased from a unregistered supplier and where purchased he pays the tax under sub section (4) of section 9 ;
  4. New Registration:-  he shall pay tax under sub section (3) or sub section (4) of section 9 on inward supply of goods or services or both.
  5. he was not engaged in the manufacture of goods as notified under clause (e) of sub section (2) of section 10 during the preceding financial year.
  6. 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
  7. 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.

Tax Rate

S.No. Category of person rate of tax
1 Manufacturers , other than Manufacturers of such goods as may be notified by the government 1%
2 suppliers making supplies referred to in clause (b) of paragraph 6 of schedule II (resturant) 2.50%
3 any other suppliers 0.50%

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