All about the Rules of Composition Levy under GST
Table of Contents
Composition rules under GST Chapter II
Rule 3 – Intimation for composition levy
- Any person who has been granted registration on a provisional basis under Rule 24(1)(b) and who opts to pay tax under section 10, shall electronically file an intimation in FORM GST CMP- 01, duly signed or verified Via EVC, on the common portal, either directly or Via a Facilitation Centre notified by the Commissioner, prior to the appointed day, but not later than thirty days after the said day, or such further period as may be extended by the Commissioner in this behalf:
Provided that where the intimation in FORM GST CMP-01 is filed after the appointed day, the GST registered person shall not collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day.
- Any person who applies for registration under Rule 8(1) may give an option to pay tax under section 10 in Part B of FORM GST REG- 01, which shall be considered as an intimation to pay tax under the said
- GST registered person who opts to pay tax under section 10 shall electronically file an intimation in FORM GST CMP-02, duly signed or verified Via electronic verification code, on the common portal, either directly or Via a Facilitation Centre notified by the Commissioner, prior to the commencement of the financial year for which the option to pay tax under the aforesaid section is exercised and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of Rule 44(4) within a period of sixty days from the commencement of the relevant financial year.
“Provided that any GST registered person who opts to pay tax under section 10 for the financial year 2020-21 shall electronically file an intimation in FORM GST CMP-02, duly signed or verified Via electronic verification code, on the common portal, either directly or Via a Facilitation Centre notified by the Commissioner, on or before 30th day of June, 2020 and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of Rule 44(4) upto the 31st day of July, 2020.”
(3A) Notwithstanding anything contained in sub-rules (1), (2) and (3), a person who has been granted registration on a provisional basis under rule 24 or who has been granted certificate of registration under Rule 10(1) may opt to pay tax under section 10 with effect from the first day of the month immediately succeeding the month in which he files an intimation in FORM GST CMP-02, on the common portal either directly or Via a Facilitation Centre notified by the Commissioner, on or before the 31st day of March, 2018, and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of Rule 44(4) within a period of one hundred and eighty days from the day on which such person commences to pay tax under section 10:
Provided that the said persons shall not be allowed to furnish the declaration in FORM GST TRAN-1 after the statement in FORM GST ITC- 03 has been furnished.
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Person who files an intimation under sub-rule (1) to pay tax under section 10 shall furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts to pay tax under the said section, electronically, in FORM GST CMP-03, on the common portal, either directly or Via a Facilitation Centre notified by the Commissioner, within a period of ninety 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
- Any intimation under sub-rule (1) or sub-rule (3) or sub-rule (3A) 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 PAN No.
Rule 4 –Composition levy effective date
- Option to pay tax U/s 10 shall be effective from the beginning of the FY, where the intimation is filed under Rule 3(3) and the appointed day where the intimation is filed under Rule 3(1).
- The intimation under rule 3(2), shall be considered only after the grant of registration to the applicant and his option to pay tax U/s 10 shall be effective from the date fixed under rule 10(2) & 10(3).
Rule 5 –Restrictions & Conditions for composition levy
The person exercising the option to pay tax U/s 10 shall comply with the following conditions, namely:-
- He is neither a casual taxable person nor a non-resident taxable person;
- the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or 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, where the option is exercised under rule 3(1);
- Goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under Rule 9(4);
- He shall pay tax U/s 9(4)(3) on inward supply of goods or services or both;
- person was not engaged in the manufacture of goods as notified U/s 10(2)(e), during the preceding FY;
- 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; and
- Person 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
- The GST registered person paying tax U/s 10 may 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 these
Rule 6 – Validity of composition levy
- The option exercised by a GST registered person to pay tax U/s 10 shall remain valid so long as he satisfies all the conditions mentioned in the said section and under these
- Person referred to in sub-rule (1) shall be liable to pay tax U/s 9(1) 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.
- The GST 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 Via electronically on the common portal or electronic verification code,
- Where the proper officer has reasons to believe that the GST registered person was not eligible to pay tax U/s 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 u/s 10 shall not be
- Upon receipt of the reply to the show cause notice issued under sub- rule (4) from the GST registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-08 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax u/s 10 from the date of the option or from the date of the event concerning such contravention, as the case may
- 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 Via 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 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.
- Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to pay tax u/s 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
Rule 7 – Composition levy – Rate of tax
This rule was made and amended vide the following notifications:
Dated 29th January 2019 – Central Tax Notification No. 3/2019
The category of GST registered persons, eligible for composition levy under section 10 & provisions of this Chapter, specified in column (2) of the Table below shall pay tax under section 10 at the rate specified in column (3) of the said Table:-
S.
No. |
Section under which composition levy is opted |
Rate of tax |
Category of GST Registered persons |
1 | Section 10(1) & section 10(2) | 0.5% of the turnover in the State or Union territory | Manufacturers, other than manufacturers of such goods as may be notified by
the Govt |
2 | Section 10(1) & section 10(2) | 2.5% of the turnover in the State or Union territory | Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II |
3 | Section 10(1) & section 10(2) | 0.5% of the turnover of taxable supplies of goods and services in the State or
Union territory |
Any other supplier eligible for composition levy U/s 10(1) & (2), |
4 | Section 10(2A) | 3 % of the turnover of taxable supplies of goods and services in the State or Union territory. | GST Registered persons not eligible under the composition levy U/s 10(1) & (2), but eligible to opt to pay tax U/s 10(2A) |
This rule was made and amended vide the following notifications
- Dated 19th June 2017- Central Tax Notification No. 3/2017
- Dated 17th August 2017 – Central Tax Notification 22/2017
- Dated 15th September 2017- Central Tax Notification 34/2017
- Dated 13th October 2017- Central Tax Notification 45/2017
- Dated 23rd January 2018- Central Tax Notification 3/2018
- Dated 29th January 2019- Central Tax Notification No. 3/2019
- Dated 03rd April 2020- Central Tax Notification 30/2020
GST Rates on Taxable Supplies under Manufacturers
GST Rates on Taxable Supplies under Composition Scheme for Traders
GST Rates on Taxable Supplies under Composition Scheme for Restaurants not serving alcohol
GST Rates on Taxable Supplies under Composition Scheme for Service Providers
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