Composition Levy (Section 10)
In terms of Section 10(1) a registered person whose aggregate turnover in the preceding financial year did not exceed Rs.50 lakhs, may opt to pay amount (not tax), in lieu of tax payable in normal levy but not exceeding following % of turnover in State or in Union Territory:
- 1% of turnover, in case of a manufacturer
- 2.5% of the turnover in case of restaurant services (excluding alcohol)
- 0.5% in case of others
Note: The State GST maybe an equal amount but we need to wait for the same to be passed.
The above-mentioned composition levy shall not be granted to a taxable person-
- who is engaged in the supply of services other than resultant services; or
- who makes any supply of goods which are not leviable to tax under the CGST Act; or
- who makes any inter-state outward supplies of goods; or
- who makes any supply of goods through an Electronic Commerce Operator who is required to collect tax at source; or
- who a manufacturer of such goods is as may be notified on the recommendation of the Council.
The registered person shall not be eligible to opt for the composition scheme unless all registered person opt the scheme. Resultantly, registered taxable person, having the same PAN has obtained more than one Registration, whether in the same State or in two different States as Head Office and Branch, then the Head Office and Branch cannot opt for Composition Levy Scheme in isolation. Both will have to opt for Composition Levy.
In terms of Section 10(3), the permission granted for Composition Levy Scheme shall stand withdrawn from the day when the aggregate turnover of the registered taxable person during a financial year exceeds Rs. 50,00,000/- or specified limit.
In terms of Section 10(4) a taxable person who pays tax under composition levy shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
It is also worth noting here that in terms of Section 10(5) if the proper officer has reasons to believe that a taxable person was not eligible to pay tax under Composition Levy Scheme, the concerned taxable person shall be liable to pay the following:
Any tax which may be payable by him under other provisions of the Act; and Penalty; provision of section 73 and 74 for shall apply for determination of tax and penalty
It is also to be noted that since Composition Levy Scheme cannot be availed by a taxable person who is engaged in the supply of services, works contractors providing Works Contract Services shall not be eligible for Composition Levy Scheme.
Consequently, aforesaid Works Contractors would be forced to maintain proper Books of Accounts and Records.