Double GST on supply made by composition dealer to Registered Dealer : ICAI raised issue

By | October 6, 2017
(Last Updated On: October 6, 2017)

Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

Law Related Issues

25. Double taxation on supply made by composition dealer

Section 17(5) of CGST Act 2017 provides that input tax credit shall not be available in
respect of goods or services or both on which tax has been paid under section 10.

Issue

If a trader takes inward supply of goods from a registered dealer who has opted for
composition scheme than although the trader is not liable to pay tax under reverse charge
under section 9(3) of CGST Act but on making further supply of goods he becomes liable
to pay tax. As per the provision of section 17(5) of CGST Act 2017 he is not eligible to
avail input tax credit which leads to double taxation as well as cascading effect

For example: Manufacturer Mr. A supply goods to registered dealer Mr. B after charging
GST @ 28%. Since the dealer Mr. B has opted for composition scheme he must pay tax
@1% without availing input tax credit and Now Mr. C, who has purchased goods from
Mr. B, supply goods to registered dealer Mr. D than he will be liable to pay GST@28%
on its further supply this leads cascading of taxes on account of non-availability of credit
by composition dealer to registered dealer. This restriction on the credit transfer making
the composition scheme ineffective.

Suggestion
It is suggested that appropriate amendment be made to avoid double taxation and
cascading effect on supply made by composition dealer to registered dealer.

 

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

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About CA Satbir Singh

Chartered Accountant having 12+ years of Experience in Taxation , Finance and GST related matters and can be reached at Email : Taxheal@gmail.com

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