Composition levy

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Central Goods and Service Tax Act, 2017

Composition levy (Sec. 10)


(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding,—

  1. one per cent of the turnover in State or turnover in Union territory in case of a manufacturer,
  2. two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and
  3. half per cent. of the turnover in State or turnover in Union territory in case of other suppliers,

subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council.

(2) The registered person shall be eligible to opt under sub-section (1), if—

  1. he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;
  2. he is not engaged in making any supply of goods which are not leviable to tax under this Act;
  3. he is not engaged in making any inter-State outward supplies of goods;
  4. he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and
  5. he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council:
    Provided that 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 under sub-section (1) unless all such registered persons opt topay tax under that sub-section.

    (3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).

    (4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

    (5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provi-sions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty.

    Notes

    • This section provides for composition levy. It is an alternative method of levy of tax designed for small taxpayers whose turnover is upto 50 Lakhs. This section further provides that certain categories of supplies or suppliers cannot opt for composition levy. A person opting to pay under this section can neither take credit of taxes paid on inputs nor it can collect any tax from the recipient.

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