FAQ on GST Composition Levy Scheme

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FAQ on gst composition levy scheme questions
Q 1. What is the rate of tax applicable to a taxable person choosing to pay tax under composition scheme?
Ans. The rate of tax applicable to a taxable person choosing to pay tax under composition scheme is not notified yet. However, Section 10(1) of the CGST Act, 2017 prescribes, subject to such conditions and restrictions as may be prescribed, that the rate of tax shall not exceed:
  1. 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 of Schedule II; and
  3. half per cent, of the turnover in State or turnover in Union territory in case of other suppliers

Q 2. Whether every taxable person may choose to pay tax under composition scheme?
Ans. No. The registered taxable persons whose aggregate turnover in the preceding financial year do not exceed fifty lakhs rupees may opt to pay tax subject to satisfaction of the following conditions:
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:

Q 3. A taxable person having same PAN can opt to pay tax under composition scheme by seeking separate registration for branches.?
Ans. No. A registered person shall not be eligible to opt for the composition scheme unless all such registered persons (branches having separate registration under a single PAN) opt to pay tax under composition scheme.

Q 4. Can the taxable person under composition Scheme is eligible to claim input tax credit?
Ans. No, taxable person under composition scheme is not eligible to claim input tax credit

Q 5. Can the customer who buys from a taxable person who is under composition scheme claim composition tax as input credit?
Ans. No. A taxable person paying taxes under composition scheme is not entitled to collect taxes from the recipient in terms of Section 10(4) of the CGST Act, 2017. Accordingly, there does not arise a question for the recipient to claim input tax credit.

Q 6. A taxable person can still pay tax under composition scheme even after the turnover in the current financial year exceeds fifty lakh rupees?
Ans. In terms of Section 9(3), the option availed for paying tax under composition scheme shall lapse with effect from the day on which the aggregate turnover during a financial year exceeds.

Q 7. W hat are the penal consequences if a taxable person violates the conditions prescribed for composition scheme?
Ans. Following are the consequence for non-compliance with the conditions specified therein:
1. shall be liable to pay additional taxes at the rates applicable to regular taxable persons;
2. shall be liable to penalty; and 
3. the amount of tax and penalty shall be recovered in terms of Section 73 & 74 of CGST Act, 2017.

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DGfreebies Dg's Blog: FAQ on GST Composition Levy Scheme
FAQ on GST Composition Levy Scheme
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