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T.N.Pandey*Advocate,NoidaUttarPradeshpandeytm@gmail.com

Composition Scheme Under the Central Goods And Services Tax (CGST) Legislation

I tisaxiomaticthatwhenanewtaxlaw,inter-alia,concerningtrade,commerceandbusi-ness is enacted, the implementational problems aremostly felt by lower andmiddle

incomegroup taxpayersbecauseof their inability toafford theservicesof taxexperts formakingcompliancetonewlaws.Thissituationislikelytobefacedwhenthenewdestinationbasedlaw,CGSTandSGST,comeintoforcefrom1stJuly,2017.ItisgoodtofindthatthepolicymakersofGSTlawshavekeptthisprobleminviewwhiledesigninglawsconcerningGSTbyincorporatinginsuchlawscompositionfeeschemeforsuchcategoryoftaxpayers.Thecompositionschemeisexaminedinfourpartsi.e.A,B,CandDasunder:-

PART-A – THE LAWSection10oftheCGSTprovidesforcompositionschemefortaxpayerswithaggregateturn-overofRs.50lakhinayear.However,provisotosection10(1)providesthattheGovt.may,bynotification,increasethelimitofRs.50lakhtosuchhigheramount,notexceedingRs.1crore, as may be recommended by the GST Council. In terms of this proviso, the GSTCouncil,initsmeetingheldon11thJune,2017,hasrecommendedincreaseintheaforesaidturnoverlimitforcompositionlevyforCGSTandSGSTfromRs.50lakhtoRs.75lakhevenbefore theGSTlawcameinto force.TheGSTCouncilhasstill togive itsview–whetherincreasedturnoverlimitshouldapplyincaseofspecialcategoryStates. Salient aspects of composition scheme

[i] Itisoptionalfortaxpayers.Theyhavetheoptiontooptforitornot;[ii] Itappliesonlytogoods–nottoservices.Thismeansthataserviceoperatorcannotoptforcompositionfeeexceptsmallrestau-rants.[iii] therateoftaxvariesfrom0.5%to2.5%(amplifiedlater].

Persons,whocannotavailthescheme[i] Incases,wheretax ispayableunderreversechargemechanism.[ii] Inthecaseofpersons,makinginterStatesupplies;[iii] Persons,whoarenottaxableunderGSTlaw;[iv] Anelectroniccommerceoperator,whoisrequiredtocollecttaxatsource;[v] Manufacturersofnotifiedgoods;[vi] Incases,whereturnoverexceedstheprescribedlimit,thenfortheturnoverexceed-

ingsuchlimit–thisoptionwillnotbeavailable. Denialofinputtaxcredit

Thepersons,availingofbenefitofpayingtaxesundercompositionscheme,willnotbeeligibletoavailofinputtaxcredits.

NocollectionoftaxfromrecipientsofsuppliesmadeAtaxableperson,towhomtheprovisionsofsub-section(1)ofsection10apply,shallnotcollectanytaxfromrecipientsofsuppliesmadebyhim.

PAN(issuedbytheI.T.Dept.)requirementforavailingthecompositionschemeThethresholdlimitofRs.50lakhwouldbeapplicabletopersons,whosatisfythefollow-ingconditionsconcerningPermanentAccountNumber(PAN)issuedbytheIncomeTaxDept.:[i] All taxablepersons,coveredby thesamePAN,shallavailof theschemeacross

India.

The policymakers of GST laws, it is good to find, have kept the implementational problem mostly felt by lower and middle income group taxpayers in view while designing laws concerning GST by incorporating in such laws composition fee scheme for such category of taxpayers. The present article discusses the composition scheme under the Central Goods and Services Tax Legislation.

*FormerChairman,CBDTandSpecialSecretary,MinistryofFinance.

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Forthis,thevalueofgoodssuppliedbyaperson,whicharesubjecttotaxonreversechargebasis,willnotbeincludibleincomputing the figureofRs.50 lakh(orRs.75 lakh if the limitgetsincreasedtothisfigure).[ii] TheturnoverfigureofRs.50/75lakhwillincludeallcate-

gories of goods, which are taxable as ‘supply(ies) ofgoods’;

[iii] The limit will include value of supplies of all businessverticalsrelatingtosametaxableperson.

PART-B – RULESRules have been notified for the operation of composition feescheme.Theseareconsideredinlaterparagraphs.[1] Rule(1)–IntimationforcompositionlevyThisRule is self-explanatory and is reproduced below for readyreference:-[1] Any person, who has been granted registration on a provi-

sional basis under sub-rule (1) of rule (Registration) 16 and who opts to pay tax u/s 10 (taxable person), shall electroni-cally file an intimation in Form GST CMP-01, duly signed, on the common portal, either directly or through a Facilitation Centre (notified by the Commissioner), prior to the appointed day, but not later than 30 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 registered person shall not collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day.

[2] Any person, who applies for registration under rule (Registration) 1, may give an option to pay tax u/s 10 in Part-B of Form GST REG-01, which shall be considered as an intima-tion to pay tax under the said section.

[3] Any registered person, who opts to pay tax u/s 10, shall elec-tronically file an intimation in Form GST CMP-02, duly signed, on the common portal, either directly or through a Facilitation Centre (notified by the Commissioner) prior to the commence-ment of the financial year for which the option to pay tax under the aforesaid section is exercised and shall furnish the state-ment in Form GST ITC-3 in accordance with the provisions of

sub-rule (4) of rule (ITC) 9 within 60 days from the commence-ment of the relevant financial year.

[4] Any person, who files an intimation under sub-rule (1) to pay tax u/s 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 through a Facilitation Centre (notified by the Commissioner), within 60 days of the date from which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.

[5] Any intimation under sub-rule (1) or sub-rule (3) (infra) 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.

Theform,tobefiledforthispurpose,isGSTCOMP-01.

[2] Rule(2)–Effectivedateforcompositionlevy

ThisRulehastwosub-rules,whichreadasunder:-“[1] Theoptiontopaytaxu/s10shallbeeffectivefromthebegin-

ningof the financialyear,where the intimation is filedundersub-rule(3)ofrule1andtheappointeddate,whereintimationis filed under sub-rule (1) of the said rule.

[2] Theintimationundersub-rule(2)ofrule1shallbeconsideredonlyaftergrantofregistrationtotheapplicantandhisoptiontopaytaxu/s10shallbeeffectivefromthedatefixedundersub-rule(2)or(3)ofrule(Registration)3”.

ThisRulecaters to3situationsnamely(i)wherea taxpayermigratestoGSTregimefromoldregime;(ii)seeksregistrationforthefirsttime;or(iii)isalreadyaregisteredtaxpayer,payingtaxatnormalrate.Inthefirstcase,theintimationistobegivenon‘appointeddate’,inthe2ndsituationfromthedateofreg-istration,and in the thirdcase, from thedateofcommence-ment of financial year.

[3] Rule(3)–Conditionsandrestrictionsforcompositionlevy Theconditionsand restrictionsprovidedby thisRule,which

the person, exercising the option, has to comply with, asstated in sub-rule (1) are:-

COMPOSITION SCHEME UNDER THE CENTRAL GOODS AND SERVICES TAx (SGST) LEGISLATION

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[a] Theperson,exercisingtheoption,isneitheracasualtax-ablepersonnoranonresidenttaxableperson;

[b] The goods held in stock by him on the appointed dayhave 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 fromhisagentorprincipaloutside theState,where theoptionisexercisedundersub-rule(1)ofrule1;

[c] Thegoodsheldinstockbyhimhavenotbeenpurchasedfrom an unregistered person andwhere purchased, hepaysthetaxundersub-section(4)ofsection9;

[d] Heshallpaytaxundersub-section(3)orsub-section(4)ofsection9oninwardsupplyofgoodsorservicesorbothreceivedfromunregisteredpersons;

[e] Hewasnotengagedinthemanufactureofgoodsasnoti-fied under clause (e) of sub-section (2) of section 10,duringtheprecedingfinancialyear;

[f] Heshallmentionthewords‘compositiontaxableperson,noteligibletocollecttaxonsupplies’atthetopofthebillofsupplyissuedbyhim;and

[g] Heshallmentionthewords‘compositiontaxableperson’on every notice or signboard displayed at a prominentplace at his principal place of business and at every addi-tional place or places of business.

Sub-rule(2)ofRule3

This sub-rule provides that option for composition fee is to be filed once only and reads thus:-“(2)Theregisteredperson,payingtaxu/s10,maynotfileafreshintimationeveryyearandhemaycontinue topay taxunder thesaidsection,subjecttotheprovisionsoftheActandtheserules”.

Rule4Thisisalongruleandprovidesasunder:-[1] Theoptionexercisedbyaregisteredpersontopaytaxu/s10

shall remain valid so long as he satisfies all the conditionsmentioned in the said section and these rules.

[2] Theperson,referredto insub-rule(1),shallbe liabletopaytaxundersub-section(1)ofsection9fromthedayheceasesto satisfy any of the conditions mentioned in section 10 or theserulesandshallissuetaxinvoiceforeverytaxablesupplymade thereafter and he shall also file an intimation for with-drawal fromthescheme inFormGSTCMP-04withinsevendays of occurrence of such event.

[3] Theregisteredperson,whointendstowithdrawfromthecom-positionschemeshall,beforethedateofsuchwithdrawal,fileanapplication inFormGSTCMP-04,dulysigned,electroni-cally on the common portal.

[4] Wheretheproperofficerhasreasonstobelievethatthereg-isteredpersonwasnoteligibletopaytaxu/s10orhascontra-venedtheprovisionsoftheActortheserules,hemayissueanotice tosuchperson inFormGSTCMP-05 toshowcausewithin 15 days of the receipt of such notice as to why option to paytaxu/s10shouldnotbedenied.

[5] Uponreceiptofreplytotheshowcausenoticeissuedundersub-rule(4)fromtheregisteredpersoninFormGSTCMP-06,theproperofficershall issueanorderinFormGSTCMP-07within30daysofreceiptofsuchreply,eitheracceptingthereplyordenyingtheoptiontopaytaxu/s10fromthedateofoptionorfromthedateoftheeventconcerningsuchcontra-vention,asthecasemaybe.

[6] Everyperson,whohasfurnishedanintimationundersub-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 hasbeenpassed inFormGSTCMP-07under sub-rule (5),mayelectronicallyfurnishatthecommonportal,eitherdirectlyorthroughaFacilitationCentre(notifiedbytheCommissioner),a statement in Form GST ITC-01 containing details of thestock of inputs and inputs contained in semi-finished or fin-ishedgoodsheld in stockbyhimon thedate onwhich theoption iswithdrawnordenied,within30days, fromthedatefrom which the option is withdrawn or from the date of order passedinFormGSTCMP-07,asthecasemaybe.

[7] Any intimation for withdrawal under sub-rule (2) or (3) ordenial of the option under sub-rule (5) in respect of any place ofbusinessinanyStateorUnionTerritory,shallbedeemedto be an intimation in respect of all other places of business registeredonthesamePAN.

Forms,tobefiledinthecontextofrule4

Contingencies FormNo.

[a] Forvoluntarywithdrawalfromthescheme GSTCMP-04[b] Situation,whereapersonceasestosatisfy anyoftheconditionsofcompositionlevy GSTCMP-05[c] Whenaproperofficerwithdrawsbenefitof scheme if he has reason to believe that the registeredpersonwasnoteligibletopaytax under composition or has contravened any suchprovisions GSTCMP-06

Wherethebenefitofthecompositionschemeistobewithdrawn,the proper officer shall issue order within 30 days of the receipt of replytoshowcausenoticeinformGSTCOMP-06(supra).

PART-C – RULESRule5Thisruleprescribesthatthecategoryofregisteredpersons,eligi-bleforcompositionlevyu/s10andtheserules,specifiedincolumn(2)oftheTablebelowshallpaytaxu/s10attheratespecifiedincolumn (3) of the Table.

[1] [2] [3]

Sl. No.

Category of registered person Rate of tax

1 Manufacturers, other than manufacturers ofsuchgoods,asmaybenotifiedbytheGovt.

1%

2 Suppliers, making supplies referred to inclause(b)ofparagraph6ofScheduleII

2.50%

3 Any other supplier eligible for compositionlevy u/s 10 and these rules

0.50%

PART-DCONCLUSION The composition scheme is meant to facilitate the lower and mid-dleleveltaxpayers,whocanavailofthesametohaveasimplifiedcompliancetothenewGSTlaw.HowitworkscanbeknownonlyaftertheGSTlawcomesintoforceattheCentralandStatelevels.Refinementstotheschemecanbemadeafteritisinoperationatleast for one year. CS

COMPOSITION SCHEME UNDER THE CENTRAL GOODS AND SERVICES TAx (SGST) LEGISLATION