CA Inter GST Composition Levy Quiz

CA Inter GST Composition Levy

Composition Scheme under GST

The Goods and Services Tax (GST) Composition Levy, often referred to as the Composition Scheme, is an alternative method designed for small taxpayers. The primary objective of this scheme is to simplify GST compliance procedures and decrease costs for small taxpayers whose annual turnover falls below the threshold limits. Under this scheme, eligible taxpayers can pay tax as a fixed percentage of their turnover each quarter, rather than undergoing complex monthly or bi-monthly filings. Regulated under sections 10(1), 10(3)(d) and rule 2A of the CGST Rules, the composition levy provides several benefits to qualifying taxpayers.

Eligibility Criteria for Composition Scheme

To be eligible for the GST Composition Levy, a taxpayer's annual turnover should not exceed the specified limits. These limits vary depending on the type of goods supplied and the location of the taxpayer. Currently, the threshold limit for most taxpayers is set at INR 75 lakhs, while for certain states like Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura, it is INR 50 lakhs. Additionally, taxpayers who supply goods through an e-commerce operator required to collect tax at source under section 52 can also opt for the composition scheme.

Persons Excluded from the Scheme

However, several types of taxpayers and transactions are excluded from the composition scheme. These include:

• Casual taxable persons or non-resident taxable persons
• Suppliers whose annual turnover crossed INR 75 lakhs
• Suppliers who have purchased goods or services from unregistered suppliers unless they've paid GST on such purchases on a reverse charge basis
• Service providers, except for those providing restaurant services
• Dealers who provide goods classified under specific tariff items, such as ice cream, pan masala, and tobacco products
• Manufacturers of goods classified under the specified categories
• Suppliers making inter-state outward supplies of goods
• Suppliers utilizing electronic commerce operators to make supplies

In summary, the GST Composition Levy allows eligible taxpayers to opt for a simpler tax structure with lower compliance requirements. By understanding the eligibility criteria, one can determine whether this scheme is suitable for their business needs.