Explained Section 10 - Composition Scheme.

07 Dec, 2023

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SECTION 10 (COMPOSITION SCHEME)

Section 10(1) Applicability-

Applicable to RP whose aggregate turnover in PFY does not exceed-

Rs 75 Lakh- for special category State (other than HP/Assam/ J&K)
Rs 150 Lakh- all other States (including HP/ Assam/ J&K)

Proviso 2 to section 10(1)- Marginal Service

Provided that a manufacturer/Catering & Restaurant/ Trader may supply service upto 10% of T/O in State/UT in PFY or Rs 5 Lakh whichever is higher.

Note-

This limit will be calculated state wise.
T/O in State/UT exclude interest on loan and advances.

Aggregate Turnover is the sum of-

Taxable Supply
Exempt Supply
Export of goods/Services/Both
Interstate supply

It Excludes-

The value of inward supply on which tax is payable on RCM basis.
CGST, SGST, UTGT, IGST & CESS
Exempt supply of services by way of Interest/ Discount on deposit/ Loan or advances.

Rate of Taxes in Composition Scheme

S. No	Category of Registered Person	Rate of Tax
1	Manufacturer other than manufacturer of notified goods such as- Ice Cream, Pan Masala, Tobacco, Fly ash blocks, Bricks of fossil meals or similar Siliceous earth, Building Bricks, earthen or roofing tiles.	0.5% of turnover in State
2	Supply as per Clause (b) of paragraph 6 of Schedule II (Restaurant Services)	2.5% of turnover in State
3	Any other supply eligible for Composition	0.5% of taxable supplies of turnover in State

Turnover in State

Includes-

All taxable supplies and exempt supplies with in State/ UT

Excludes-

Value of inward supplies on which tax is payable on RCM basis.
Value of supplies from 1^st day of April of FY upto the date when such person become liable to Registration.
Value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

2^nd proviso to section 10(1)

Maximum amount of services can be provided upto higher of-

10% of T/O in PFY
or Rs 5 lakhs

Note-

While computing value of services,

Restaurant services will not be considered.
Interest on loans/advances/Deposits will not be considered

Turnover limit for Composition levy of Goods

Rs 75 Lakh	Rs 1.5 Crores
Arunachal Pradesh	All other States
Uttarakhand
Manipur
Mizoram
Meghalaya
Nagaland
Sikkim
Tripura

Who are NOT eligible to opt for Composition Scheme? [section 10(2) and (2A)]

Registered person who is not eligible for composition scheme for goods	Registered person who is not eligible for composition scheme for services
Supplier engaged in making any supply of goods or services which are not leviable to tax.	Supplier engaged in making any supply of goods or services which are not leviable to tax.
Supplier engaged in making any inter State outward Supplies of goods or services.	Supplier engaged in making any inter State outward Supplies of goods or services.
Person Supplying any goods or services through an electronic - commerce operator who is required to collect tax at source under section 52.	Person Supplying any goods or services through an electronic - commerce operator who is required to collect tax at source under section 52.
manufacturer of Ice cream, panmasala, tobacco, aerated waters. fly ash bricks; fly ash aggregate, fly ash blocks, - bricks of fossil meals or similar siliceous earths, building bricks, earthen or roofing tiles.	Manufacturer of notified goods or supplier of notified services
Supplier who is either a casual taxable person or a non-resident taxable person.	Supplier who is either a casual taxable person or a non-resident taxable person.
Supplier of services, save as provided in section 10(1).

Section 10(2A) Composition Scheme for Pre-Dominantly Services provider

Applicabilites

Applicable to RP whose aggregate Turnover in PFY does not exceed Rs 50 Lakh
Person is not eligible to opt scheme u/s 10(1)(2).

Tax Rate

3% of Turnover in State/UT

Section 10(3)

Option availed by RP u/s 10(1)(2A) shall lapse w.e.f the date on which TO during FY exceeds the limit of Rs 75 Lakh/ 1 Crores as the case may be.

Section 10(4)

Composition dealer cannot collect tax on outward supply and cannot claim ITC.
Composition dealer cannot issue tax invoice.

Rule 5

Conditions and Restrictions for Composition levy-
They shall pay tax u/s 9(3)/9(4) (RCM) on inward supplies.
They are neither CTP nor NRTP
They shall mention words "Composition taxable person, not eligible to collect tax on supplies" at the top of the BOS, on every notice or signboard.
Can not manufacture the notified goods.

Rule 3 & 4 {Intimation of opting for Composition levy}

Person apply for registration.
Can opt for composition scheme at any time during at year while applying for registration.
Composition levy shall be effective from the date on which registrationis effective.

RegistrationPerson

Can opt for composition on levy from beginning of any FY.
Composition scheme shall be effective from the beginning of the said FY.

CA Kavita Dhingra

Explained Section 10 - Composition Scheme.

SECTION 10 (COMPOSITION SCHEME)

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