com
Composition Scheme
under GST
CA Yashwant J. Kasar
B.Com, FCA, DISA, CISA, PMP, FAIA
22.07.2017
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Once a dealer (termed as 'taxable person' under GST) opts for composition
of tax, he is not entitled to claim any other exemption - T H Venkate
Gowda v. CCT (2007) 5 VST 553 (Karn HC DB) * Bhadauria Gram Sewa
Sansthan v. ACST (2006) 148 STC 356 (All HC FB) * DCCT v. B V Subba
Reddy(2010) 31 VST 530 (Karn HC DB).
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Where more than one registered persons are having the same Permanent Account Number (issued
under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme
unless all such registered persons opt to pay tax under composition scheme.
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Aggregate turnover is defined under Sec.2(6) as "aggregate turnover" means the 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, to be computed on all India basis i.e.in all business verticals in a state and all other
States and UT but excludes central tax, State tax, Union territory tax, integrated tax and
cess;
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Who is 'manufacturer :
"Manufacture" means processing of raw material or inputs in any
manner that results in emergence of a new product having a distinct
name, character and use and the term "manufacturer" shall be
construed accordingly - section 2(72) of CGST Act.
Thus simple activities like packing, re-packing, labelling, testing,
repairs, mixing etc. will not qualify as 'manufacture'.
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A registered person Can opt by filing FORM GST CMP-02 Effective from
under GST opting for prior to commencement of F.Y. for the beginning of
Composition scheme which option is exercised the financial
year
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Where the intimation in form GST CMP-01 is filed after 1-7-2017, the
registered person shall not collect any tax from 1-7-2017 but shall issue bill
of supply for supplies made after the said day - proviso to rule 3(1) of CGST
Rules, 2017
In case of fresh registration, the intimation will be effective from date when
he becomes liable to registration, if application filed within 30 days from the
day he becomes liable to register i.e. retrospective effect.
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Invoices
A registered person opting for composition scheme shall not issue a tax invoice.
He shall issue a BILL OF SUPPLY (Sec.31 (3) (c)) containing various details as given below (Rule-4)
Name, address and GSTIN of the supplier;
A consecutive serial number not exceeding sixteen characters, in one or more multiple series,
containing alphabets or numerals or special characters -hyphen or dash and slash symbolized as "-"
and "/"respectively, and any combination thereof, unique for a financial year;
Date of its issue;
Name, address and GSTIN or UIN, if registered, of the recipient;
HSN Code of goods or Accounting Code for services;
Description of goods or services or both;
Value of supply of goods or services or both taking into account discount or abatement, if any; and
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Invoices
Signature or digital signature of the supplier or his authorized representative:
1. The registered person may not issue a bill of supply if the value of the goods or services or both
supplied is less than two hundred rupees subject to the following condition that
a. the recipient is not a registered person; and
b. The recipient does not require such invoice, and shall issue a consolidated tax invoice for such
supplies at the close of each day in respect of all such supplies.
Every registered person opting for composition scheme 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.
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A registered person opting for composition scheme shall maintain all records as
prescribed under Sec. 35 & 36 and in Accounts and records Rules. Some
relaxations are given to them like non-preparation of register of tax invoice
issued/received / input credit availed etc.
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Returns
Quarterly returns prescribed to be filed by 18th of the month succeeding the Quarter in
Form GSTR-4
The registered person shall make payment of tax no later than the last date on which he
is required to of file the return
Returns to be furnished for every tax period whether or not any supplies of goods or
services or both have been made during such tax period.
The registered person shall furnish one annual return for every financial year
electronically on or before 31st December following the end of such financial year in
Form GSTR-9A.
Proper officer may cancel registration the if the person opting for composition scheme
does not furnish return for three consecutive tax period i.e. 3 quarters. (Sec 29(2)(b))
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Transitional Provisions
Any registered person migrating from existing system to GST and opting to pay tax under Sec.10
i.e. under Composition Scheme cannot carry forward the balance of CENVAT credit/ eligible
duties in the returns relating to the period ending the day immediately preceding the appointed
day in the GST regime.
Further A registered person, who was either paying tax at a fixed rate or paying a fixed amount in
lieu of the tax payable under the existing law shall NOT be entitled to take, in his electronic
credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the appointed day
Any migrating registered person who opt for Composition levy under section 10 shall furnish the
details of stock, including the inward supply of goods received from unregistered persons, held
by him on the day preceding the date from which he opts to pay tax under the said section,
electronically, in FORM GST CMP-03, on the Common Portal within sixty days of the date from
which the option for composition levy is exercised or within such further period as may be
extended by the Commissioner in this behalf.
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Withdrawal/Cancellation of Permission
The registered person paying tax under section 10 may not file a fresh intimation every
year and he may continue to pay tax under the said section subject to the provisions of the
Act and composition rules. Once granted, the eligibility would be valid so long as he satisfies
all the conditions mentioned in the said section and composition rules unless the
permission is cancelled or is withdrawn or the person becomes ineligible for the scheme.
The option of composition availed of by a registered person under Sec 10 shall lapse with
effect from the day on which his aggregate turnover during a financial year exceeds the
limit specified or due to non-compliance of any of the eligibility conditions prescribed in
Sec 10 and the composition rules and he may also opt out of composition scheme at his will
and from that day normal provisions of GST taxability will apply and he will issue Tax invoice
for every taxable supply and he shall also file an intimation for withdrawal from the scheme
in FORM GST CMP-04 within seven days of occurrence of such event.
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Withdrawal/Cancellation of Permission
Where the proper officer has reasons to believe that the registered person was not eligible to pay tax
under section 10 or has contravened the provisions of the Act or these rules, he may issue a notice to
such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to
why option to pay tax under section 10 should not be denied and may pass an order in FORM GST
CMP-07 for cancellation of permission after giving opportunity to the registered person and
demanding the following:
Differential tax and interest viz., tax payable under the other provisions of the Act after deducting
the tax paid under composition scheme
Penalty determined based on the demand provisions under Section 73 or 74.
The registered person shall file a statement in FORM GST ITC-01 containing details of the stock of
inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on
which the option is withdrawn or denied, within 30 days, from the date from which the option is
withdrawn or from the date of order passed in FORM GST CMP-07.
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5. GST CMP-05 Notice for denial of option to pay tax under section 10
7. GST CMP-07 Order for acceptance / rejection of reply to show cause notice
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The amount of input tax credit relating to inputs held in stock, inputs contained in
semi-finished and finished goods held in stock, and capital goods held in stock
shall, for the purposes of sub-section (4) of section 18 or sub-section (5) of section
29, be determined in the following manner, namely,
a) for inputs held in stock and inputs contained in semi-finished and finished
goods held in stock, the input tax credit shall be calculated proportionately on the
basis of the corresponding invoices on which credit had been availed by the
registered taxable person on such inputs;
b) for capital goods held in stock, the input tax credit involved in the remaining
useful life in months shall be computed on pro rata basis, taking the useful life as
five years.
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Illustration:
Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months= 5 months ignoring a part of the
month
Input tax credit taken on such capital goods= C
Input tax credit attributable to remaining useful life= C multiplied by 5/60
(2) The amount, as specified in sub-rule (1) shall be determined separately
for input tax credit of [ central tax, State tax, Union territory tax and
integrated tax ] .
(3) Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount under sub-rule
(1) based on the prevailing market price of the goods on the effective date
of the occurrence of any of the events specified in sub-section (4) of
section 18 or, as the case may be, sub-section (5) of section 29.
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(4) The amount determined under sub-rule (1) shall form part of the output tax liability
of the registered person and the details of the amount shall be furnished in
FORM GST ITC-03, where such amount relates to any event specified in sub-section (4)
of section 18 and in FORM GSTR-10, where such amount relates to the cancellation of
registration.
(5) The details furnished in accordance with sub-rule (3) shall be duly certified by a
practicing chartered accountant or cost accountant.
(6) The amount of input tax credit for the purposes of sub-section (6) of section 18
relating to capital goods shall be determined in the same manner as specified in clause
(b) of sub- rule (1) and the amount shall be determined separately for input tax credit
of [central tax, State tax, Union territory tax and integrated tax]
Provided that where the amount so determined is more than the tax determined on
the transaction value of the capital goods, the amount determined shall form part of
the output tax liability and the same shall be furnished in FORM GSTR-1.
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Thank You !
CA Yashwant J. Kasar
B.Com, FCA, DISA, CISA, PMP, FAIA
Cell: +91 98224 88777
Email : yashwant@ykc.co.in
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