1.1  Composition levy is a scheme introduced by the Government for registered taxable persons. The benefit of the composition scheme will only be available to those taxable persons who are registered under GST and their aggregate turnover is less than 50 Lakh in one financial year. It is also to be noted that the provision for composition levy starts with a non-obstante clause, and hence the same would override other provisions.

1.2  However, the composition levy has been made subject to sub-section 3 of section 7 which provides for payment of tax on reverse charge basis. Therefore, provisions of reverse charge would continue to apply to a composition dealer also.

1.3   Provisions relating to composition levy are discussed under the following broad heads:

a. Eligibility to avail the scheme.

b.  Permission from Government

c.  Restriction on the person availing the scheme.

d. Penalty in case it is found that a person was not eligible to pay tax under the scheme of composition levy.

Eligibility

1.4  A person would be eligible to pay a Composition levy as per section 8(1), if:

a.  He is a registered taxable person (as per section 9 of the act).

b.  His aggregate turnover in a financial year does not exceed Rs 50 Lakh.

Aggregate turnover has been defined in section 2(6) and has been explained in next point.

c.  The Provision states that such taxable person should not affect any inter-state supplies of goods and/or services.

d.  All taxable persons having the same PAN as held by him, must opt to pay tax under this section.

Permission from Government:

1.5  To avail the scheme of composition levy, the eligible registered taxable person is required to make an application to Central or State government as the case may be. Thereupon, the proper officer of Central or a State government may permit a registered taxable person, subject to such conditions and restrictions as may be prescribed by the government.

1.6  For the purpose of permission, proper officer has been defined under section 2(79) as the officer who performs functions in relation to such grant of permission and who is assigned the function by the Board/Commissioner of SGST.

1.7   It must be clarified here that availing of the composition scheme is an option available to a taxable person who is eligible for it.

Restriction on the person availing the scheme.

1.8  Like the restriction in the State VAT Acts, the GST Act has also imposed certain restrictions on the person opting for composition scheme. As per section 8(2) of the Act, a person opting for Composition levy shall not collect any tax on supplies made by him. Further, he is also not allowed to avail any credit of input tax.

Penalty

1.9  A taxable person, who is not eligible to opt the scheme of composition levy but still opts, is liable to pay

i.  Tax that may be payable by him under other provisions of the act (i.e. under normal provisions)

ii.   penalty equal to the amount of tax levied under this section

1.10   However, section 8(3) states that proper officer must have reasons to believe that such person was not eligible to opt for the scheme of composition levy. Furthermore, the provision requires that the proper office must serve a show cause notice and provide a reasonable opportunity of being heard to such person before imposing any penalty.

1.2  However, the composition levy has been made subject to sub-section 3 of section 7 which provides for payment of tax on reverse charge basis. Therefore, provisions of reverse charge would continue to apply to a composition dealer also.

1.3  Provisions relating to composition levy are discussed under the following broad heads:

a.  Eligibility to avail the scheme.

b.  Permission from Government

c.   Restriction on the person availing the scheme.

d.   Penalty in case it is found that a person was not eligible to pay tax under the scheme of composition levy.

Eligibility

1.4   A person would be eligible to pay a Composition levy as per section 8(1), if:

a. He is a registered taxable person (as per section 9 of the act).

b. His aggregate turnover in a financial year does not exceed Rs 50 Lakh.

Aggregate turnover has been defined in section 2(6) and has been explained in next point.

c.    The Provision states that such taxable person should not affect any inter-state supplies of goods and/or services.

d.   All taxable persons having the same PAN as held by him, must opt to pay tax under this section.

Permission from Government:

1.5  To avail the scheme of composition levy, the eligible registered taxable person is required to make an application to Central or State government as the case may be. Thereupon, the proper officer of Central or a State government may permit a registered taxable person, subject to such conditions and restrictions as may be prescribed by the government.

1.6  For the purpose of permission, proper officer has been defined under section 2(79) as the officer who performs functions in relation to such grant of permission and who is assigned the function by the Board/Commissioner of SGST.

1.7  It must be clarified here that availing of the composition scheme is an option available to a taxable person who is eligible for it.

Restriction on the person availing the scheme.

1.8  Like the restriction in the State VAT Acts, the GST Act has also imposed certain restrictions on the person opting for composition scheme. As per section 8(2) of the Act, a person opting for Composition levy shall not collect any tax on supplies made by him. Further, he is also not allowed to avail any credit of input tax.

Penalty

1.9  A taxable person, who is not eligible to opt the scheme of composition levy but still opts, is liable to pay

i.  Tax that may be payable by him under other provisions of the act (i.e. under normal provisions)

ii.  penalty equal to the amount of tax levied under this section

1.10   However, section 8(3) states that proper officer must have reasons to believe that such person was not eligible to opt for the scheme of composition levy. Furthermore, the provision requires that the proper office must serve a show cause notice and provide a reasonable opportunity of being heard to such person before imposing any penalty.