Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

Law Related Issues

21. Availability of Composition Levy

Section 10 of the CGST Act provides that benefit of Composition Scheme would be available to a registered taxable person, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but

(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) 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
(c) half per cent. of the turnover in State or turnover in Union territory in case of other
suppliers, subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh
rupees to such higher amount, not exceeding one crore rupees, as may be recommended by
the Council.
Further, the registered person shall be eligible to opt under sub-section (1), if––
(a) he is not engaged in the supply of services other than supplies referred to in clause (b)
of paragraph 6 of Schedule II;
(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;
(c) he is not engaged in making any inter-State outward supplies of goods;
(d) 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
(e) he is not a manufacturer of such goods as may be notified by the Government on the
recommendations of the Council:

Further sub-section (4) of Section 10 provides that if the proper officer has reasons to
believe that a taxable person was not eligible to pay tax under sub-section (1), such person
shall, in addition to any tax that may be payable by him under other provisions of this Act,
be liable to a penalty and the provisions of section 63 or Section 74, as the case may be, shall apply
mutatis mutandis for determination of tax and penalty.

Issue
Non-availability of composition scheme to those who are supplying services or making any
supply of goods which are not leviable to tax under the Act seems to be harsh on such
person. Small suppliers, supplying services only shall be required to comply with the
normal provisions of the law which could prove to be cumbersome for such suppliers.
Further, small suppliers making few of the supplies not chargeable to tax while majority of
supplies are taxable may find this provision an unnecessary burden on them.

Suggestion
It is suggested that benefit of composition scheme be extended to those who are supplying
services or making any supply of goods which are not leviable to tax under the Act.

Read Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

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