Excise and Taxation Department, Haryana

[Use restricted for training purpose only]

Composition Levy Scheme under Haryana GST Act, 2017

Relevant Legal Provisions:

Section 10 of the CGST/HGST Act, 2017 - Composition Levy.

Section 39 (2) of CGST/HGST Act, 2017- Furnishing of Return by Taxable Person under
Composition levy.
GST Composition Rules (Rule 3 to 7).

Relevant Definitions: Term (Reference section)

Aggregate Turnover: (Section 2(6) of CGST/HGST Act, 2017)

Turnover in state (Section 2 (112) of CGST/HGST Act, 2017)
Reverse Charge (Section 2 (98) of the CGST/HGST Act, 2017)
Exempt Supply (Section 2 (47) of the CGST/HGST Act, 2017)
Non-taxable supply (Section 2 (78) of the CGST/HGST Act, 2017)

Rates of Tax under Composition Scheme:

As per section 10(1) of the CGST/HGST Act, 2017, read with Rule 7 of GST Composition Rules
rates under composition scheme are as under:
(i) 2% (1% CGST+1% SGST) of the turnover in the State in case of manufacturers.
(ii) 5% (2.5% CGST+2.5% SGST) of the turnover in the State in case of food/restaurant services.
(iii) 1% (0.5% CGST+0.5% SGST) of the turnover in the State in case of other suppliers (like
traders/agents).

Other tax liability to be

discharged:
Any supply of goods/services on which tax is to be paid on reverse charge basis by the
recipient (Ref: Section 9(3) of the CGST/HGST Act, 2017. [Notification no.38/ST-2, dated 30.06.2017]
For example:- 1) A lottery distributor shall have to pay tax on reverse charge basis in respect
of supply of lottery by the State Government.
2) Any registered person shall have to pay tax on reverse charge basis in respect of supply of
Tobacco leaves or Bidi wrapper leaves(tendu) from an agriculturist.
Any supply of goods/services received from unregistered supplier (Ref: Section 9(4) of the
CGST/HGST Act, 2017. [Rule 5(1)(d)]
For example:- 1) Any registered person shall have to pay tax on reverse charge basis in respect
of supply of Eucalyptus or Sugar Cane from an agriculturist who is not registered.

Eligibility Condition:

A registered person, whose aggregate turnover in the preceding financial year did not exceed 75

1
 lakh rupees may opt composition scheme under section 10 (1) of CGST/HGST Act, 2017. [Govt., on
the recommendation of the GST Council is empowered to raise this limit up to Rs. 1 crore].

Aggregate Turnover: total value of (Taxable supplies + exempt supplies + export of goods and
services +inter-state supplies) in a Financial Year. Since Composition Taxable person cannot make
inter-state supply, value of inter-state supply has to be Zero in case of such Taxable person.
Further, for determination of aggregate turnover, the tax paid under GST law is not to be included.

Exempt supplies means Nil rated supplies or fully exempted supplies or non-taxable supplies.
Other Key Conditions for Availing Composition
Scheme:
A casual taxable person or a non-resident taxable person can not opt for composition
scheme; (Ref: Rule 5(1)(a) of composition Rules)
If migrating from existing scheme, the goods held in stock by the composition tax payer on
the appointed day have not been purchased in the course of inter-State trade/ commerce or
imported from a place outside India or received from his branch situated outside the State
or from his agent or principal outside the State. (Ref: Rule 5(1)(b) of composition Rules)
The goods held in stock by him have not been purchased from an unregistered person and
where purchased, he pays the tax under reverse charge mechanism. (Ref: Rule 5(1)(c) of
composition Rules)
He shall mention the words composition taxable person, not eligible to collect tax on
supplies at the top of the bill of supply by him) (Ref: Rule 5(1)(f) of composition Rules)
He shall mention the words "composition taxable person" on every notice or signboard
displayed at a prominent place at his principal place of business and at every additional
place or places of business. (Ref: Rule 5(1)(g) of composition Rules)
He is not entitled to any Input Tax Credit (Ref: Section 10(4) of the CGST/HGST Act, 2017)
He cannot collect any tax from the recipient on supplies made by him (Ref: Section 10(4) of
the CGS T/HGST Act, 2017)

Non-eligibility for Composition Scheme (Ref: Section 10 of CGST/HGST Act, 2017):

The following taxable persons are not eligible for composition levy,-
engaged in supplies of services other than supply of goods, being food or any other article of
human consumption or any drink (other than alcoholic liquor) {Ref: Clause (b) of Paragraph 6 of
Schedule II of CGST/HGST Act, 2017} i.e. supplies other than restaurants, caterers not eligible
(Ref: Section 10(2)(a) of the CGST/HGST Act,2017);
making supply of goods not leviable to GST (Ref: Section 10(2)(b) of the CGST/HGST Act,2017);
making inter-state supplies of goods (Ref: Section 10(2) (c) of the CGST/HGST Act,2017);
making supplies through electronic commerce operator (Ref: Section 10(2)(d) of the CGST/HGST
Act,2017).
being manufacturer of any notified goods (notification no.34/ST-2, dated 30.06.2017) as per
details under: (Ref: Section 10(2)(e) of the CGST/HGST Act,2017).

Sr. Classification Description of Goods

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 No. (Tariff item/Chapter)

1. 2105 00 00 Ice cream and other edible ice, whether or not containing cocoa
2. 2106 91 20 Pan Masala
3. 24 Tobacco and manufactured tobacco substitute

Validity of Composition levy (Rule 6 of Composition Rules):

(1) The option exercised by a registered person to pay tax under section 10 shall remain valid so
long as he satisfies all the conditions mentioned in the said section and under these rules.
(2) The person referred to in sub-rule (1) shall be liable to pay tax under sub-section (1) of section
9 from the day he ceases to satisfy any of the conditions mentioned in section 10 or the
provisions of this Chapter and shall issue tax invoice for every taxable supply made thereafter
and he shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04
within seven days of the occurrence of such event.
(3) The registered person who intends to withdraw from the composition scheme shall, before
the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or verified
through electronic verification code, electronically on the common portal.
(4) 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 provisions of this
Chapter, 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 the option to pay tax under section 10 shall
not be denied.
(5) Upon receipt of the reply to the show cause notice issued under sub-rule (4) from the
registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST
CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply,
or denying the option to pay tax under section 10 from the date of the option or from the date
of the event concerning such contravention, as the case may be.
(6) Every person who has furnished an intimation under sub-rule (2) or filed an application for
withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of
option has been passed in FORM GST CMP-07 under sub-rule (5), may electronically furnish at
the common portal, either directly or through a Facilitation Centre notified by the
Commissioner, 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 a period of thirty days from the 4 date from which
the option is withdrawn or from the date of the order passed in FORM GST CMP-07, as the
case may be.
(7) Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to
pay tax under section 10 in accordance with sub-rule (5) in respect of any place of business in
any State or Union territory, shall be deemed to be an intimation in respect of all other places
of business registered on the same Permanent Account Number.

Filing of
Return:
Return to be filed on Quarterly basis in FORM GSTR-4 (Ref: Section 39 (2) of CGST/HGST Act, 2017

3
 and Rule 62 of GST Return Rules).
th th th th
Return to be filed by 18 day after the end of each quarter [by 18 April, 18 July, 18 Oct.,
th
and 18
January] (Ref: Section 39 (2) of CGST/HGST Act, 2017).
Annual Return to be filed in FORM GSTR-9A on or before the thirty-first day of December
following the end of such financial year (Ref: section 44(1) of the CGST/HGST Act, 2017 and Rule 80
of GST Return Rules)
Fee to be paid in case of late filing of Quarterly Return @one hundred rupees for every day
subject to
maximum amount of Rs. 5,000/- (Ref: Section 47 (1) of the CGST/HGST Act,
2017).
Fees to be paid in case of late filing of annual return @ one hundred rupees for every day
subject to maximum amount calculated at 0.25% of his turnover in the State (Ref: Section 47 (2)
of the CGST/HGST Act, 2017).

Issue of Bill of
Supply:

Bill of supply to be issued instead of tax invoice (Ref: section 31(3)(c) of the CGST/HGST Act, 2017
and Rule 49 of Invoice Rules).
Bill of supply to carry words, namely, composition taxable person, not eligible to collect
tax on
supplies on the top. (Ref: Rule 5(1)(g) of GST Composition Rules).

Payment of Tax
th
Tax payable for each quarter to be paid by 18 day from the end of quarter (Ref: Section 39(7)
of the
CGST/HGST Act, 2017).
Self-assessed tax can be paid after due date (late payment allowed up to 30 days) on
payment of interest.
Interest to be paid in case of late payment of self-assessed tax or short payment of tax @ 18%.
(Ref: Section 50 (1) of the CGST/HGST Act, 2017).

Details of outward supplies and inward supplies mandated under Section 37 and 38 of the
CGST/HGST Act,2017 are required to be filed by Composition taxable person.

Offences and Penalty:

Not furnishing returns for three consecutive tax periods may result in cancellation of
registration by proper officer (Ref: Section 29 (2) (b) of CGST/HGST Act, 2017).
For other penalties for non filing of returns, please refer Filing of Return as above.
Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice,
result in imposition of interest along with penalty of 10% of tax amount or ten thousand
rupees, whichever is higher in case of other than fraud cases.(Ref: Section 73(11) of the
CGST/HGST Act, 2017)

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 Tax not paid or short paid of self-assessed tax by a dealer will, after proper service of notice,
result in imposition of interest along with penalty of 50% of tax amount in case of fraud
cases.(Ref: Section74(11) of the CGST/HGST Act, 2017)

Time of Exercising of option for Availing Composition Scheme (Ref: Rule 3 of GST composition rules)
Option to avail scheme prior to appointed day or within 30 days from the appointed day
or
At the time of first registration.
or
Prior to the beginning of financial year

Comparison of Composition GST levy vs. Normal GST levy at a Glance

Subject area Composition scheme Normal scheme

Eligibility for Input tax credit Not eligible Eligible
Filing of return Quarterly Monthly
Collection of taxes from Not allowed to collect tax from Allowed to collect tax paid or to be paid
buyers buyers. from buyers.
Input tax credit by recipient Not allowed Allowed
of Supply
Compliance Burden 5 returns to be filed in a year. 13 returns to be filed in a year.
[12 monthly returns under Section 39* + one
[4 quarterly returns + one annual
annual return (under Section 44*).
return].
*denotes CGST/HGST Act, 2017].
Inter-state outward supplies Not allowed Allowed
Inter-state inward supplies Allowed Allowed
Supply of services Not allowed except supply of No such restriction
food /drinks ( other than
alcoholic drinks)i.e. only
restaurant, caterer service
allowed.
Document to be issued Bill of supply Tax Invoice

Other important Points:

Government is empowered to increase the limit of Rs. 75 lakhs limit to Rs. 1 crore on the
recommendation of GST Council (Ref: Proviso to Section 10 (1) of CGST/HGST Act, 2017).

Government is empowered to notify t h e goods, the manufacturer of which shall not be

eligible for composition levy scheme (Ref: Proviso to Section 10 (2)(e) of CGST/HGST Act,
2017).

In case of establishment being in more than one State/UT, all such establishments are
required to avail composition scheme or to be under normal taxpaying scheme (Ref: Proviso
to Section 10 (2) of CGST/HGST Act, 2017).

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 On aggregate turnover exceeding Rs. 75 lakh at any day in Financial Year, the taxpayer
becomes ineligible for composition levy scheme on such day and on that day onwards, the
taxable person is required to pay taxes a s normal tax payer GST (Ref: Section 10 (3) of
C G S T/ HGST Act, 2017 read with rule 6 (2) of composition rules.

Procedure for Opting for Composition Scheme

Procedure for opting for composition scheme provided in rule 3 and rule 4 of the GST
Composition
Rules.(discussed below)
The assesses can be divided into following 3 categories:
(i) Person registered under existing laws exercising the option with effect from appointed
date.
(ii) Person taking new registration by filing FORM GST REG-1.
(iii) Registered person opting for composition at the beginning of financial year.

(A). Taxable Person registered (under existing law) exercising Option with effect from Appointed
Date:
(Ref: Rule 3(1) of GST composition Rules).
As per rule 3(1) of the Composition Rules, the person who has been granted
registration on provisional basis and who opts to pay tax under section 10 shall electronically
file intimation in form GST CMP-01 on common portal prior to the appointed day or within 30
days.
.
(B). Newly Registered Person (not registered under Existing law) exercising option at the time of
obtaining registration (Ref: Rule 3(2) of GST composition Rules).

Any person who is not registered under the existing law, but intends to register
either from appointed date or subsequent to that will have to make application in form GST-
REG-1. He shall indicate the option of availing benefit of section 10. Such exercising of
option in form GST REG-1 shall be considered as intimation to pay tax under the said section
as provided in rule 3(2) of GST Composition Rules.
(C). Registered Person opting composition scheme u/s 10 after obtaining registration (Ref: Rule 3(3) of
GST Composition Rules).

Any other registered person who wants to opt for payment of tax under section
10 shall electronically file intimation in FORM GST CMP-02 duly signed in common portal
prior to commencement of the financial year for which the option to pay tax under section is
exercised.
[The term existing law has been defined under Section 2(48) of the CGST/HGST Act, 2017]

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 Presentation of Composition Scheme Under GST in Pictorial Form

Not allowed for 1. engaged in supplies of services other than supply of

registered persons goods, being food or any other article of human
Composition consumption or any drink (other than alcoholic
liquor)
Scheme 2. making supply of goods not leviable to GST.
3. making inter-state supplies of goods.
Allowed for registered 4. making supplies through electronic commerce
persons of the operator.
following categories 5. being manufacturer of any notified goods i.e.
i. ice cream and other edible ice, whether or not
containing cocoa;
ii. pan masala;
iii. tobacco and manufactured tobacco substitute.
Manufacturers other Traders / Food/Restaurant 6. having aggregate turnover of more than Rs.75 Lakh in
than of Notified Goods Suppliers Services the preceding financial year.
7. casual taxable person.
8. non-resident taxable person.
Rate of tax Rate of tax Rate of tax 9. existing taxable persons having closing stock
2% 1% 5% purchased/received/imported/consigned from
(1% HGST) (0.5% HGST ) (2.5% HGST) outside the state.
+ + +
(1% CGST) (0.5% CGST) (2.5% CGST)
 GST Composition Formats

Intimation to pay tax under section 10 (composition levy) (Only for persons registered under the
GST CMP-01
existing law migrating on the appointed day)

GST CMP-02 Intimation to pay tax under section 10 (composition levy) (For persons registered under the Act)

Intimation of details of stock on date of opting for composition levy (Only for persons registered under
GST CMP-03
the existing law migrating on the appointed day)

GST CMP-04 Intimation/Application for withdrawal from composition Levy

GST CMP-05 Notice for denial of option to pay tax under section 10

GST CMP-06 Reply to the notice to show cause

GST CMP-07 Order for acceptance / rejection of reply to show cause notice
 Excise and Taxation Department, Haryana

GOODS AND SERVICES TAX

FREQUENTLY ASKED QUESTIONS ON COMPOSITION

LEVY UNDER GST
Q1. What is the composition levy under GST Act?
Ans. The composition levy is an alternative method of levy of tax designed for small taxpayers
whose turnover is up to Rs.75 Lakh (Rs.50 Lakh in case special category States). The objective of
composition scheme is to bring simplicity and to reduce the compliance cost for the small
taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme
can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at
normal rate.
[Section 10 of CGST/HGST 2017]

Q2. What is the specified rate of composition levy?

Sr.
Category of Registered person Rate of tax
No.
1. Manufacturers, other than manufacturers of such 2% (1% Central tax plus 1% State
goods as may be notified by the Government (Ice tax) of the turnover
cream, Pan Masala, Tobacco products etc.)
2. Restaurant Services 5% (2.5% Central tax plus 2.5% State
Tax) of the turnover
3. Traders or any other supplier eligible for composition 1% (0.5% Central tax plus 0.5% State
levy Tax) of the turnover

[Section 10(1) of CGST/HGST 2017, Rule 7 of CGST/HGST Rules 2017]

Q3. What is the eligibility category for opting for composition levy? Which are the Special
Category States in which the turnover limit for Composition Levy for Central tax and State tax
purpose shall be Rs. 50 Lakh?
Ans. Composition scheme is a scheme for payment of GST available to small taxpayers whose
aggregate turnover in the preceding financial year did not cross Rs.75 Lakh. In the case of
following States, limit of turnover is Rs. 50 Lakh:-
a) Arunachal Pradesh b) Assam c) Manipur
d) Meghalaya e) Mizoram f) Nagaland
g) Sikkim h) Tripura i) Himachal Pradesh
[Section 10(1) of CGST/HGST 2017]

Q4. Who are the persons not eligible for composition scheme?
Ans. Following persons are not allowed to opt for the composition scheme:-
a) a casual taxable person or non-resident person;
b) suppliers whose aggregate turnover in the preceding financial year crossed Rs.75 Lakh;
c) supplier who has purchased any goods or services from unregistered supplier unless he
has paid GST on such goods or services on reverse charge basis;
d) supplier of services, other than restaurant service;
 e) persons supplying goods which are not taxable under GST law;
f) suppliers making any supply of goods through an electronic commerce operator who is
required to collect tax at source under section 52 and;
g) a manufacturer of following goods:

Sr. Classification
Description of Goods
No. (Tariff item/Chapter)
1. 2105 00 00 Ice cream and other edible ice, whether or not containing
cocoa
2. 2106 91 20 Pan Masala
3. 24 Tobacco and manufactured tobacco substitute

[Section 10(2) read with Rule 5 of CGST/HGST Act, Notification 34/ST-2, dt 30.06.2017]

Q5. When will a person opting for composition levy pay tax?
Ans. A person opting for composition levy will have to pay tax on quarterly basis before 18 th of
the month succeeding the quarter during which the supplies were made.
[Rule 62 of CGST/HGST Rules, 2017]

Q6. A person availing composition scheme during a financial year crosses the turnover of
Rs.75 lakh/50 lakh during the course of the year i.e. say he crosses the turnover of Rs.75
lakh/50 lakh in December? Will he be allowed to pay tax under composition scheme for the
remainder of the year i.e. till 31st March?
Ans. No. The option to pay tax under composition scheme lapses from the day on which his
aggregate turnover during the financial year exceeds the specified limit (Rs.75 lakh/Rs.50 lakh).
He is required to file an intimation for withdrawal from the scheme in FORM GST CMP-04 within
seven days from the day on which the threshold limit has been crossed.
However, such person shall be allowed to avail the input tax credit in respect of the
stock of inputs and inputs contained in semi-finished or finished goods held in stock by him and
on capital goods held by him on the date of withdrawal and furnish a statement within 30 days
of withdrawal containing the details of such stock held, in FORM GST ITC-01 on the common
portal.
[Section 10(3) of CGST/HGST Act, 2017]

Q7. How will the aggregate turnover be computed for the purpose of composition?
Ans. Aggregate turnover will be computed on the basis of turnover on an all-India basis and will
include value of all taxable supplies, exempt supplies and exports made by all persons with
same PAN, but would exclude inward supplies under reverse charge as well as Central,
State/Union Territory and Integrated taxes and cess.
[Section 2(6) of CGST/HGST Act, 2017]

Q8. Can a person who has opted to pay tax under the composition scheme avail input Tax
Credit on his inward supplies?
Ans. No. A taxable person opting to pay tax under the composition scheme is out of the credit
chain. He can not take credit on his input supplies. When he switches over from composition
scheme to normal scheme, eligible credit on the date of transition would be allowed (refer Q 6
above).
Q9. Can a registered person, who purchases goods from a taxable person paying tax under
the composition scheme, avail credit of tax paid on purchases made from the composition
dealer?
Ans. No. As the composition dealer can not collect tax paid by him on outward supplies from his
customers, the registered person making purchases from a taxable person paying tax under the
composition scheme can not avail credit.

Q10. Can a person paying tax under the composition scheme issue a tax invoice under GST?
Ans. No. He can issue a bill of supply in lieu of tax invoice.

Q11. Are monthly returns required to be filed by the person opting to pay tax under the
composition scheme?
Ans. Such persons need to electronically file quarterly returns in Form GSTR-4 on the GSTN
common portal by the 18th of the month succeeding the quarter. For example, return in respect
of supplies made during July, 2017 to September, 2017 is required to be filed by 18 th October
2017.
[Rule 62 of CGST/HGST Rule 2017]

Q12. What is the basic information that needs to be furnished in GSTR-4?

Ans. It would contain details of the turnover in the State or Union Territory, inward supplies of
goods or services or both and tax payable.

Q13. A person opting to pay tax under the composition scheme receives input/input services
from an unregistered person. Will the composition taxpayer have to pay GST under reverse
charge? If yes, in what manner?
Ans. Yes. Tax will have to be paid on such supplies by the composition taxpayer under reverse
charge mechanism. The tax can be paid by the 18th day of the month succeeding the quarter in
which such supplies were received. The information relating to such supplies should be shown
by the composition taxpayer in Table 4 of return in FORM GSTR-4.
[Rule 62(3) of CGST/HGST Rule 2017]

Q14. What is the form in which an intimation for payment of tax under composition scheme
needs to be made by the taxable person?
Ans. The intimation is to be filed electronically in FORM GST CMP-01 or FORM GST CMP-02.

Q15. A person registered under existing law (Central Excise/Service Tax/VAT) and who has
been granted registration on a provisional basis wants to opt for composition scheme. How
and when can he do that?
Ans. Such a person has to electronically file a duly signed/verified intimation in FORM GST
CMP-01, on the common portal, prior to 22nd June, 2017 or such further period as may be
allowed by the Commissioner.
Q16. What are the other compliances which a provisionally registered person opting to pay
tax under the composition levy need to make?
Ans. Such person is required to furnish the details of stock, including the inward supply of goods
received from unregistered person, held by him on the day preceding the date from which he
opts to pay tax under the composition scheme, electronically, in FORM GST CMP-03, on the
common portal either directly or through a Facilitation Centre notified by the Commissioner,
within a period of sixty days from the date on which the option for composition levy is exercised
or within such further period as may be extended by the Commissioner in this behalf.

Q17. Can a person making application for fresh registration under GST opt for composition
levy at the time of making application for registration?
Ans. Yes. Such person can give the option to pay tax under the composition scheme in Part B of
FORM GST REG-01. This will be considered as an intimation to pay tax under the composition
scheme.

Q18. Can the option to pay tax under composition levy be exercised at any time of the year?
Ans. No. The option is required to be given electronically in FORM GST CMP-02, prior to the
commencement of the relevant financial year.

Q19. Can a person who has already obtained registration, opt for payment under composition
levy? If so, how?
Ans. Yes. Such persons need to give intimation electronically in Form GST CMP-02 but it will be
effective from beginning of the financial year only.

Q20. What are the compliances from ITC reversal point of view that need to be made by a
person opting for composition levy?
Ans. The registered person opting to pay tax under composition scheme is required to pay an
amount equal to the input tax credit in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day immediately preceding the date of
exercise of option. The ITC on inputs shall be calculated proportionately on the basis of
corresponding invoices on which credit had been availed by the registered taxable person on
such inputs.
In respect of capital goods held in stock on the day immediately preceding the date of
exercise of option, the input tax credit involved in the remaining useful life in months shall be
computed on pro-rate basis, taking the useful life as 5 years. Assume capital goods have been in
use for 4 years, 6 months and 15 days. The useful remaining life in months will be 5 months
ignoring the part of the month. If ITC on such capital goods is taken as C, ITC attributable to the
remaining useful life will be C multiplied by 5/60. This would be the amount payable on capital
goods.
The ITC amount shall be determined separately for integrated tax, central tax and state
tax/union territory tax. The payment can be made by debiting electronic credit ledger, if there is
sufficient balance in said ledger, or by debiting electronic cash ledger. The balance, if any in the
electronic credit ledger would lapse. Such person also have to furnish the statement in FORM
GST ITC-03 which is a declaration for intimation of ITC reversal/payment of tax on inputs held in
stock, inputs contained in semi-finished and finished goods held in stock and capital goods
under section 18(4) of the CGST/HGST Act, 2017 within a period of sixty days from the
commencement of the relevant financial year.

Q21. In case a person has registration in multiple states, can he opt for payment of tax under
composition levy only in one state and not in other state?
Ans. The option to pay tax under composition scheme will have to be exercised for all States.

Q22. What is the effective date of composition levy?

Ans. There can be three situations:

Situation Effective date of composition levy

Persons who have been granted The appointed date is 22nd June, 2017
provisional registration and who opt for
composition levy (Intimation under Rule
3(1)).
Persons opting for composition levy at Effective date of registration; intimation shall be
the time of making application for new considered only after the grant of registration and his
(registration in the same registration option to pay tax under section 10 shall be effective
application itself (Intimation under Rule from the effective date of registration.
3(2)).
Persons opting for composition after The beginning of the financial year.
obtaining registration (Intimation under
Rule 3(3)).

Q23. What are the other conditions and restrictions subject to which a person is allowed to
avail of composition scheme?
Ans. The person exercising the option to pay tax under section 10 shall comply with the
following other conditions (in addition to what is stated in answer to Q 4 above), namely:-
a) he 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;
b) he shall mention the words composition taxable person on every notice or signboard
displayed at a prominent place at his principal place of business and at every additional
place or places of business.

Q24. What is the validity of composition levy?

Ans. The option to pay tax under composition levy would remain valid so long as conditions
mentioned in section 10 of the CGST/HGST Act, 2017 and Rule 3 to 5 of the CGST/HGST Rules,
2017 remain satisfied.

Q25. Can a person paying tax under composition levy, withdraw voluntarily from the scheme?
If so, how?
Ans. Yes. The registered person who intends to withdraw from the composition scheme can file
a duly signed or verified application in FORM GST CMP-04.
Every person who has filed an application for withdrawal from the composition scheme,
may electronically furnish, 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
of withdrawal, within a period of thirty days or withdrawal.

Q26. What action can be taken by the proper officer for contravention of any provisions of
composition levy and how?
Ans. Where any contravention is observed by the proper officer wherein the registered person
was not eligible to pay tax under the composition scheme or has contravened the provisions of
the CGST/HGST Act, 2017 or provisions of Chapter II of the CGST/HGST Rules, 2017, 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 the option to pay tax under the composition scheme shall not
be denied.
Upon receipt of the reply to the said show cause notice in FORM GST CMP-06, the proper
officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of
such reply, either accepting the reply, or denying the option to pay tax under the composition
scheme from the date of the option or from the date of the event concerning such
contravention, as the case may be.

Q27. In case the option to pay tax under composition levy is denied by the proper officer, can
the person avail ITC on stock after denial?
Ans. Yes, ITC can be availed by filing 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 denied as per order in FORM GST CMP-07, within a period of
thirty days from the order.

Q28. Will withdrawal intimation in any one place be applicable to all places of business?
Ans. Yes. Any intimation or application for withdrawal in respect of any place of business in any
State or Union Territory shall be deemed to be an intimation in respect of all other places of
business registered on the same Permanent Account Number.

Q29. Can supplier of services opt for composition levy?

Ans. No, the only exception being supplier of restaurant services.

Q30. What are the penal provision if a person opts for the composition scheme in violation of
the conditions?
Ans. If a taxable person has paid tax under the composition scheme though he was not eligible
for the scheme then the person would be liable to penalty and the provisions of section 73 or
74 shall be applicable for determination of tax and penalty.

Q31. Can a person paying tax under composition scheme make supplies of goods to SEZ?
Ans. No. Supplies to SEZ from domestic tariff area will be treated as inter-State supply. A person
paying tax under composition scheme can not make inter-State outward supply of goods. Thus,
for making supplies to an SEZ unit, a person needs to take registration as a regular taxpayer. The
supplies to SEZ will be zero rated and the supplier will be entitled to make supplies without
payment of tax or if he pays tax, he will be entitled to refund of tax so paid.

Q32. A registered person has excess ITC of Rs. 10,000/- in his last VAT return for the period
immediately preceding the appointed day. Under GST, he opts for composition scheme. Can
he carry forward the aforesaid excess ITC to GST?
Ans. The registered person will not be able to carry forward the excess ITC of VAT to GST, if he
opts for composition scheme.

Q33. Must a composition dealer maintain detailed records?

Ans. No, a dealer registered under composition scheme is not required to maintain detailed
records as in the case of a normal taxpayer.

Q34. Is liability to pay taxes under the Reverse Charge Mechanism covered under the
Composite Scheme?
Ans. Any tax payable under Reverse Charge Mechanism will not be covered under the scheme.
These taxes will be liable to be paid as a normal taxpayer.

Q35. Do tax payers under the composition scheme also need to file GSTR-1 and GSTR-2?
Ans. No. Composition tax payers do not need to file any statement of outward or inward
supplies. They have to file a quarterly return in Form GSTR-4 by the 18th of the month after the
end of the quarter. Since they are not eligible for any input tax credit, there is no relevance of
GSTR-2 for them and since the credit of tax paid under Composition Levy is not eligible, there is
no relevance of GSTR-1 for them. In their return, they have to declare summary details of their
outward supplies along with the details of tax payment. They also have to give details of their
purchases in their quarterly return itself, most of which will be auto-populated.

Q36. Can composition scheme be availed of by a manufacturer?

Ans. Yes. Manufacturer can opt for composition scheme but turnover should not be more than
Rs.75 Lakh (Rs.50 Lakh in case special category States). Tax shall be paid @ 2% on the turnover
in the State.

Q37. What is the scope of composition scheme under GST?

Ans. Small taxpayers with an aggregate turnover in a preceding financial year up to Rs.75 Lakh
shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a
percentage of his turnover in a state during the year without the benefit of ITC. A taxpayer
opting for composition levy shall not collect any tax from his customers.

Q38. Whether the composition scheme will be optional or compulsory?

Ans. The composition scheme is optional and not compulsory.
Q39. What returns are to be filed by registered person who has opted composition scheme?
Ans. A registered person under composition scheme have to file quarterly returns in FORM
GSTR-4 by the 18th day after the end of each quarter. He has to file annual return in the FORM
GSTR-9A.
[section 39(2), of the CGST/HGST Act, 2017 and CGST/HGST Rules 2017]

Q40. What is the due date of filing of annual return in case of composition scheme?
Ans. On or before the thirty-first day of December following the end of such financial year.
[section 44(1) of the CGST/HGST Act, 2017 and CGST/HGST Rules 2017]

Q41. Can composition tax be collected from the customers?

Ans. No. The registered person under composition scheme is not permitted to collect tax. It
means that a composition scheme supplier can issue a tax invoice.

Q42. Can composition scheme be availed of by a service supplier?

Ans. The composition scheme is not available for services sector, except restaurants.

Q43. Do registered persons under composition scheme need to file a fresh intimation every
year for composition?
Ans. No. The registered person paying tax under composition scheme need 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 the rules framed thereunder.

Q44. Can a person opting for composition scheme procure goods from inter-state supplier?
Ans. Yes, a person opting for composition scheme can procure goods from inter-state supplier
and there is no restriction on any inward supply.

Q45. What is the fees/penalty to be paid in case of late filing of annual return under
composition scheme?
Ans. Fees to be paid in case of late filing of annual return @ one hundred rupees for every day
subject to maximum amount calculated at 0.25% of his turnover in the State.
(Ref: Section 47 (2) of the CGST/HGST Act, 2017)

Q46. Can registered person under composition scheme make an inward supply from the other
state?
Ans. Yes, a dealer under composition scheme is allowed to make an inward inter-state supply
from the other state. However, outward supplies to the other state are not allowed to the
dealer under composition scheme.

Q47. Is any notice required by a proper officer for denial of option to pay tax under
composition scheme?
Ans. Yes. Where the proper officer has reasons to believe that the registered person was not
eligible to pay tax under composition scheme or has contravened the provisions of the Act or
provisions of Chapter-II, 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 the option to pay tax under
composition scheme, shall not be denied.
(Ref: Rule 6 (4) of the CGST/HGST Rule, 2017)

Q48. Is any order required by a proper officer for denial of option to pay tax under
composition scheme?
Ans. Yes. Upon receipt of the reply to the show cause notice issued under rule 6(4) from the
registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST
CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or
denying the option to pay tax under composition scheme from the date of the option or from
the date of the event concerning such contravention, as the case may be.
(Ref: Rule 6 (5) of the CGST/HGST Rule, 2017)

Q49. I am a manufacturer of Ice cream and my turnover is Rs.40 Lakh per year. Can I opt
composition scheme under GST?
Ans. No, Manufacturer of Ice cream and Tobacco products are not allowed to opt for
composition scheme.

Q50. I am a trader of footwear and my daily sale is between Rs.6000 to 7000. Can I opt
composition scheme under GST?
Ans. Yes. Your annual turnover is approximately Rs.25 Lakh. You can opt for composition
scheme which is limited to turnover of Rs.75 Lakh in a year and you can pay tax @ 1% on this
turnover.