Composition Levy Scheme | Goods and Services Tax (GST) - B Com PDF Download

 Page 1


                                                       39
Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment of taxes and 
filling of returns to certain categories of taxable person. As a result such taxable person is not required to maintain 
elaborate records and filing detailed returns. Section 10 of the CGST Act, provides for composition levy to such 
person.
Person eligible for Composition Levy u/s 10 of CGST Act:
 
Composition Levy u/s 10 of CGST Act 
Supply of service 
other than 
restaurant and 
outdoor caterer 
Supply of 
goods 
exempted 
from GST 
Inter State 
outward 
supplies 
of goods 
Person is eligible to opt composition levy provided previous year turnover = ` 1 crore 
Option to pay tax at Composition 
levy is not applicable 
NO 
YES 
NO 
NO 
YES 
YES 
Supply of Goods 
through ECO 
NO 
YES 
Page 2


                                                       39
Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment of taxes and 
filling of returns to certain categories of taxable person. As a result such taxable person is not required to maintain 
elaborate records and filing detailed returns. Section 10 of the CGST Act, provides for composition levy to such 
person.
Person eligible for Composition Levy u/s 10 of CGST Act:
 
Composition Levy u/s 10 of CGST Act 
Supply of service 
other than 
restaurant and 
outdoor caterer 
Supply of 
goods 
exempted 
from GST 
Inter State 
outward 
supplies 
of goods 
Person is eligible to opt composition levy provided previous year turnover = ` 1 crore 
Option to pay tax at Composition 
levy is not applicable 
NO 
YES 
NO 
NO 
YES 
YES 
Supply of Goods 
through ECO 
NO 
YES 
40                                                                                                                          
Changes to be made prospectively from 15th November 2017:
Composition scheme limit to be increased to ` 1.5 crore (can be extended to ` 2 crore later).
As per Section 10(1) of CGST Act, 2017, Registered person, whose aggregate turnnover in the financial year did 
not exceed ` 1 crore (` 75 Lakhs for north-eastern states), may opt to pay composition levy. (vide notification No. 
46/2017 - Central Tax, Dt.-13/10/2017).
Note: North eastern states includes
1. Arunachal Pradesh;
2. Assam;
3. Manipur
4. Meghalaya
5. Mizoram;
6. Nagaland;
7. Sikkim;
8. Tripura;
9. Himachal Pradesh.
Aggregate turnover as per Section 2(6) of CGST Act, 2017:
The term “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward 
supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services 
or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all 
India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.
Aggregate turnover includes Aggregate turnover excludes
The value of exported goods/services Inward supplies on which the recipient is required to 
pay tax under Reverse Charge Mechanism (RCM).
Exempted goods/services or both which attracts nil 
rate of tax or wholly exempt from tax and includes non-
taxable supply.
• Central tax (CGST),
• State tax (SGST), 
• Union territory tax and 
• Integrated tax (IGST) 
Inter-state supplies between distinct persons having 
same PAN
• Compensation  Cess
Supply on own account and on behalf of principal.
Important points:
(i) The turnover will be computed PAN wise.
(ii) The partner and partnership firm will have different PAN Nos. Thus the turnover of the partner and partnership 
firm will not be aggregated.
(iii) The HUF and individual coparcener of the family have different PAN Nos. Hence, turnover of Karta of HUF in 
his individual capacity and turnover of Karta as a Karta of HUF will not be aggregated.
Supply of goods, after completion of jobwork, by a registered jobworker shall be treated as the supply of goods 
by the principal referred to in Sec. 143 of the CGST Act, 2017, and the value of such goods shall not be included in 
the aggregate turnover of the registered jobworker. It will be included in the turnover of principal.
The turnover threshold for 
Jammu & Kashmir and 
Uttarakhand shall be ` 1 crore 
Page 3


                                                       39
Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment of taxes and 
filling of returns to certain categories of taxable person. As a result such taxable person is not required to maintain 
elaborate records and filing detailed returns. Section 10 of the CGST Act, provides for composition levy to such 
person.
Person eligible for Composition Levy u/s 10 of CGST Act:
 
Composition Levy u/s 10 of CGST Act 
Supply of service 
other than 
restaurant and 
outdoor caterer 
Supply of 
goods 
exempted 
from GST 
Inter State 
outward 
supplies 
of goods 
Person is eligible to opt composition levy provided previous year turnover = ` 1 crore 
Option to pay tax at Composition 
levy is not applicable 
NO 
YES 
NO 
NO 
YES 
YES 
Supply of Goods 
through ECO 
NO 
YES 
40                                                                                                                          
Changes to be made prospectively from 15th November 2017:
Composition scheme limit to be increased to ` 1.5 crore (can be extended to ` 2 crore later).
As per Section 10(1) of CGST Act, 2017, Registered person, whose aggregate turnnover in the financial year did 
not exceed ` 1 crore (` 75 Lakhs for north-eastern states), may opt to pay composition levy. (vide notification No. 
46/2017 - Central Tax, Dt.-13/10/2017).
Note: North eastern states includes
1. Arunachal Pradesh;
2. Assam;
3. Manipur
4. Meghalaya
5. Mizoram;
6. Nagaland;
7. Sikkim;
8. Tripura;
9. Himachal Pradesh.
Aggregate turnover as per Section 2(6) of CGST Act, 2017:
The term “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward 
supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services 
or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all 
India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.
Aggregate turnover includes Aggregate turnover excludes
The value of exported goods/services Inward supplies on which the recipient is required to 
pay tax under Reverse Charge Mechanism (RCM).
Exempted goods/services or both which attracts nil 
rate of tax or wholly exempt from tax and includes non-
taxable supply.
• Central tax (CGST),
• State tax (SGST), 
• Union territory tax and 
• Integrated tax (IGST) 
Inter-state supplies between distinct persons having 
same PAN
• Compensation  Cess
Supply on own account and on behalf of principal.
Important points:
(i) The turnover will be computed PAN wise.
(ii) The partner and partnership firm will have different PAN Nos. Thus the turnover of the partner and partnership 
firm will not be aggregated.
(iii) The HUF and individual coparcener of the family have different PAN Nos. Hence, turnover of Karta of HUF in 
his individual capacity and turnover of Karta as a Karta of HUF will not be aggregated.
Supply of goods, after completion of jobwork, by a registered jobworker shall be treated as the supply of goods 
by the principal referred to in Sec. 143 of the CGST Act, 2017, and the value of such goods shall not be included in 
the aggregate turnover of the registered jobworker. It will be included in the turnover of principal.
The turnover threshold for 
Jammu & Kashmir and 
Uttarakhand shall be ` 1 crore 
                                                       41
Persons not entitled to avail Composition Scheme:
The Section 10(2) of the CGST Act, 2017 specifies the benefit of composition scheme shall not be granted if a 
taxable person is: 
(a) engaged in the supply of services (other than restaurant and outdoor catering service);
(b) engaged in making any supply of goods which are not leviable to tax under this Act; 
(c) engaged in making any inter-state outward supplies of goods; 
(d) engaged in making any supply of goods through an electronic commerce operator who is required to 
collect tax at source under section 52; and 
(e) a manufacturer of such goods as may be notified by the Government on the recommendations of the 
Council: 
Example : 93
M/s X Ltd. being a manufacturer of laptops has four factories in Chennai, Salem, Coimbatore and Madurai.
Place P.Y. Turnover ` in lakhs (Including Taxes @ 18%)
Chennai 57.91
Salem 12.00
Coimbatore 8.00
Madurai 10.00
Chennai –II 23.60
Total 111.51
Is M/s X Ltd eligible for composition levy in the current year?
Answer: 
Aggregate turnover = 111.51 x 100/118 = ` 94.50 lakh
Note: Since, aggregate turnover in the preceding financial year does not exceed ` 1 crore, M/s X Ltd. is eligible 
for composition Scheme.
Example : 94
M/s Paul Ltd. being a trader of laptops has two units in Chennai and in Mumbai.
Place P.Y. Turnover ` in lakhs (Excluding taxes)
Chennai 52.00
Mumbai 12.00
Your are required to answer the following: 
(a) Is M/s Paul Ltd eligible for composition levy in the current year?
(b) If so, can M/s Paul Ltd. opt composition scheme for Chennai location and normal scheme for 
Mumbai?
(c) Need to give separate intimations for opting composition scheme in each State.
Answer: 
(a)  Yes. M/s Paul Ltd. is eligible to avail the composition scheme in both the states namely Tamil Nadu and 
Maharashtra.
Since, M/s Paul Ltd. has same PAN, and his aggregate turnover does not exceeds rupees one crore, it is 
eligible for composition levy, even though the company has multiple registrations under GST.
(b)  No. M/s Paul Ltd. cannot opt composition scheme for one location and normal scheme for another location. 
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 
Page 4


                                                       39
Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment of taxes and 
filling of returns to certain categories of taxable person. As a result such taxable person is not required to maintain 
elaborate records and filing detailed returns. Section 10 of the CGST Act, provides for composition levy to such 
person.
Person eligible for Composition Levy u/s 10 of CGST Act:
 
Composition Levy u/s 10 of CGST Act 
Supply of service 
other than 
restaurant and 
outdoor caterer 
Supply of 
goods 
exempted 
from GST 
Inter State 
outward 
supplies 
of goods 
Person is eligible to opt composition levy provided previous year turnover = ` 1 crore 
Option to pay tax at Composition 
levy is not applicable 
NO 
YES 
NO 
NO 
YES 
YES 
Supply of Goods 
through ECO 
NO 
YES 
40                                                                                                                          
Changes to be made prospectively from 15th November 2017:
Composition scheme limit to be increased to ` 1.5 crore (can be extended to ` 2 crore later).
As per Section 10(1) of CGST Act, 2017, Registered person, whose aggregate turnnover in the financial year did 
not exceed ` 1 crore (` 75 Lakhs for north-eastern states), may opt to pay composition levy. (vide notification No. 
46/2017 - Central Tax, Dt.-13/10/2017).
Note: North eastern states includes
1. Arunachal Pradesh;
2. Assam;
3. Manipur
4. Meghalaya
5. Mizoram;
6. Nagaland;
7. Sikkim;
8. Tripura;
9. Himachal Pradesh.
Aggregate turnover as per Section 2(6) of CGST Act, 2017:
The term “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward 
supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services 
or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all 
India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.
Aggregate turnover includes Aggregate turnover excludes
The value of exported goods/services Inward supplies on which the recipient is required to 
pay tax under Reverse Charge Mechanism (RCM).
Exempted goods/services or both which attracts nil 
rate of tax or wholly exempt from tax and includes non-
taxable supply.
• Central tax (CGST),
• State tax (SGST), 
• Union territory tax and 
• Integrated tax (IGST) 
Inter-state supplies between distinct persons having 
same PAN
• Compensation  Cess
Supply on own account and on behalf of principal.
Important points:
(i) The turnover will be computed PAN wise.
(ii) The partner and partnership firm will have different PAN Nos. Thus the turnover of the partner and partnership 
firm will not be aggregated.
(iii) The HUF and individual coparcener of the family have different PAN Nos. Hence, turnover of Karta of HUF in 
his individual capacity and turnover of Karta as a Karta of HUF will not be aggregated.
Supply of goods, after completion of jobwork, by a registered jobworker shall be treated as the supply of goods 
by the principal referred to in Sec. 143 of the CGST Act, 2017, and the value of such goods shall not be included in 
the aggregate turnover of the registered jobworker. It will be included in the turnover of principal.
The turnover threshold for 
Jammu & Kashmir and 
Uttarakhand shall be ` 1 crore 
                                                       41
Persons not entitled to avail Composition Scheme:
The Section 10(2) of the CGST Act, 2017 specifies the benefit of composition scheme shall not be granted if a 
taxable person is: 
(a) engaged in the supply of services (other than restaurant and outdoor catering service);
(b) engaged in making any supply of goods which are not leviable to tax under this Act; 
(c) engaged in making any inter-state outward supplies of goods; 
(d) engaged in making any supply of goods through an electronic commerce operator who is required to 
collect tax at source under section 52; and 
(e) a manufacturer of such goods as may be notified by the Government on the recommendations of the 
Council: 
Example : 93
M/s X Ltd. being a manufacturer of laptops has four factories in Chennai, Salem, Coimbatore and Madurai.
Place P.Y. Turnover ` in lakhs (Including Taxes @ 18%)
Chennai 57.91
Salem 12.00
Coimbatore 8.00
Madurai 10.00
Chennai –II 23.60
Total 111.51
Is M/s X Ltd eligible for composition levy in the current year?
Answer: 
Aggregate turnover = 111.51 x 100/118 = ` 94.50 lakh
Note: Since, aggregate turnover in the preceding financial year does not exceed ` 1 crore, M/s X Ltd. is eligible 
for composition Scheme.
Example : 94
M/s Paul Ltd. being a trader of laptops has two units in Chennai and in Mumbai.
Place P.Y. Turnover ` in lakhs (Excluding taxes)
Chennai 52.00
Mumbai 12.00
Your are required to answer the following: 
(a) Is M/s Paul Ltd eligible for composition levy in the current year?
(b) If so, can M/s Paul Ltd. opt composition scheme for Chennai location and normal scheme for 
Mumbai?
(c) Need to give separate intimations for opting composition scheme in each State.
Answer: 
(a)  Yes. M/s Paul Ltd. is eligible to avail the composition scheme in both the states namely Tamil Nadu and 
Maharashtra.
Since, M/s Paul Ltd. has same PAN, and his aggregate turnover does not exceeds rupees one crore, it is 
eligible for composition levy, even though the company has multiple registrations under GST.
(b)  No. M/s Paul Ltd. cannot opt composition scheme for one location and normal scheme for another location. 
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 
42                                                                                                                      
(1) of Section 10 of CGST Act, 2017 unless all such registered persons opt to pay tax under that sub-section. 
(c)  Intimation to opt composition scheme in respect of any place of business in any State or Union Territory shall 
be deemed to be intimation in respect of all other places of business registered on the same Permanent 
Account Number (PAN).
Example : 73  
M/s X & Co., sells electrical cables, motors and wires. Company also undertake to repair switches, motor sets. 
Turnover during preceding financial year from sale of goods is ` 59 lakhs, whereas repairing unit is ` 1 lakh.
Is M/s X & Co. eligible for composition scheme. Advice.
Answer: 
No. Since, M/s X & Co., deals partly with supply of services. Therefore, the benefit of composition scheme will be 
denied to M/s X & Co.
Example : 74 
Mr. Q is a paper merchant own 5,000 sq ft., shop at Chennai. Mr. Q offered extra space available in their shop 
to supplier to put up their advertisement. His turnover in the previous year from sale of goods ` 20 lakhs and 
advertising services ` 2 lakhs. Is Mr. Q eligible for composition scheme in the current year?
Answer: 
No. Mr. Q being a paper merchant charging services and hence, the benefit of composition scheme is not 
allowed.
Example : 75 
Hotel King Pvt., Ltd. provider of restaurant services in New Delhi. They also serve beer, whisky and so on. Turnover 
in the preceding previous year is ` 67 lakhs. Is Hotel King Pvt. Ltd. eligible for composition scheme in the current 
year?
Answer: 
Hotel King Pvt. Ltd., is not eligible for composition scheme. Since they are supplying the product, which is not 
levied to GST (namely beer, whisky).
Example : 76 
Mr. A of Chennai is a retailer dealing with cell phones. He supplies goods to the person located in Chennai and 
Pondicherry. Aggregate turnover in the preceding financial year is ` 45 lakhs. Mr. A wants to opt for composition 
scheme in the current financial year. Advise.
Answer: 
No. When the person makes inter-state supply of goods, benefit of composition scheme is prohibited. Therefore, 
Mr. A will not be entitled to the benefit of composition scheme.
Example : 77
Peter England is a trader who sells his ready-made clothes online on Amazon India (an Electronic Commerce 
Operator). He received an order for ` 12, 00,000 in the previous year. Peter England also supplied goods from 
there out lets. Aggregate turnover of the company in the previous year was ` 21,00,000.
Is Peter England eligible for composition scheme?
Answer: 
No. Peter England engaged in making supply of goods through an electronic commerce operator who is 
required to collect tax at source under section 52 of CGST Act, 2017. Hence, Peter England is not eligible for 
composition scheme.
Page 5


                                                       39
Composition Scheme
The Government of India provides for simplified and easy of doing business scheme for payment of taxes and 
filling of returns to certain categories of taxable person. As a result such taxable person is not required to maintain 
elaborate records and filing detailed returns. Section 10 of the CGST Act, provides for composition levy to such 
person.
Person eligible for Composition Levy u/s 10 of CGST Act:
 
Composition Levy u/s 10 of CGST Act 
Supply of service 
other than 
restaurant and 
outdoor caterer 
Supply of 
goods 
exempted 
from GST 
Inter State 
outward 
supplies 
of goods 
Person is eligible to opt composition levy provided previous year turnover = ` 1 crore 
Option to pay tax at Composition 
levy is not applicable 
NO 
YES 
NO 
NO 
YES 
YES 
Supply of Goods 
through ECO 
NO 
YES 
40                                                                                                                          
Changes to be made prospectively from 15th November 2017:
Composition scheme limit to be increased to ` 1.5 crore (can be extended to ` 2 crore later).
As per Section 10(1) of CGST Act, 2017, Registered person, whose aggregate turnnover in the financial year did 
not exceed ` 1 crore (` 75 Lakhs for north-eastern states), may opt to pay composition levy. (vide notification No. 
46/2017 - Central Tax, Dt.-13/10/2017).
Note: North eastern states includes
1. Arunachal Pradesh;
2. Assam;
3. Manipur
4. Meghalaya
5. Mizoram;
6. Nagaland;
7. Sikkim;
8. Tripura;
9. Himachal Pradesh.
Aggregate turnover as per Section 2(6) of CGST Act, 2017:
The term “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward 
supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services 
or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all 
India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.
Aggregate turnover includes Aggregate turnover excludes
The value of exported goods/services Inward supplies on which the recipient is required to 
pay tax under Reverse Charge Mechanism (RCM).
Exempted goods/services or both which attracts nil 
rate of tax or wholly exempt from tax and includes non-
taxable supply.
• Central tax (CGST),
• State tax (SGST), 
• Union territory tax and 
• Integrated tax (IGST) 
Inter-state supplies between distinct persons having 
same PAN
• Compensation  Cess
Supply on own account and on behalf of principal.
Important points:
(i) The turnover will be computed PAN wise.
(ii) The partner and partnership firm will have different PAN Nos. Thus the turnover of the partner and partnership 
firm will not be aggregated.
(iii) The HUF and individual coparcener of the family have different PAN Nos. Hence, turnover of Karta of HUF in 
his individual capacity and turnover of Karta as a Karta of HUF will not be aggregated.
Supply of goods, after completion of jobwork, by a registered jobworker shall be treated as the supply of goods 
by the principal referred to in Sec. 143 of the CGST Act, 2017, and the value of such goods shall not be included in 
the aggregate turnover of the registered jobworker. It will be included in the turnover of principal.
The turnover threshold for 
Jammu & Kashmir and 
Uttarakhand shall be ` 1 crore 
                                                       41
Persons not entitled to avail Composition Scheme:
The Section 10(2) of the CGST Act, 2017 specifies the benefit of composition scheme shall not be granted if a 
taxable person is: 
(a) engaged in the supply of services (other than restaurant and outdoor catering service);
(b) engaged in making any supply of goods which are not leviable to tax under this Act; 
(c) engaged in making any inter-state outward supplies of goods; 
(d) engaged in making any supply of goods through an electronic commerce operator who is required to 
collect tax at source under section 52; and 
(e) a manufacturer of such goods as may be notified by the Government on the recommendations of the 
Council: 
Example : 93
M/s X Ltd. being a manufacturer of laptops has four factories in Chennai, Salem, Coimbatore and Madurai.
Place P.Y. Turnover ` in lakhs (Including Taxes @ 18%)
Chennai 57.91
Salem 12.00
Coimbatore 8.00
Madurai 10.00
Chennai –II 23.60
Total 111.51
Is M/s X Ltd eligible for composition levy in the current year?
Answer: 
Aggregate turnover = 111.51 x 100/118 = ` 94.50 lakh
Note: Since, aggregate turnover in the preceding financial year does not exceed ` 1 crore, M/s X Ltd. is eligible 
for composition Scheme.
Example : 94
M/s Paul Ltd. being a trader of laptops has two units in Chennai and in Mumbai.
Place P.Y. Turnover ` in lakhs (Excluding taxes)
Chennai 52.00
Mumbai 12.00
Your are required to answer the following: 
(a) Is M/s Paul Ltd eligible for composition levy in the current year?
(b) If so, can M/s Paul Ltd. opt composition scheme for Chennai location and normal scheme for 
Mumbai?
(c) Need to give separate intimations for opting composition scheme in each State.
Answer: 
(a)  Yes. M/s Paul Ltd. is eligible to avail the composition scheme in both the states namely Tamil Nadu and 
Maharashtra.
Since, M/s Paul Ltd. has same PAN, and his aggregate turnover does not exceeds rupees one crore, it is 
eligible for composition levy, even though the company has multiple registrations under GST.
(b)  No. M/s Paul Ltd. cannot opt composition scheme for one location and normal scheme for another location. 
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 
42                                                                                                                      
(1) of Section 10 of CGST Act, 2017 unless all such registered persons opt to pay tax under that sub-section. 
(c)  Intimation to opt composition scheme in respect of any place of business in any State or Union Territory shall 
be deemed to be intimation in respect of all other places of business registered on the same Permanent 
Account Number (PAN).
Example : 73  
M/s X & Co., sells electrical cables, motors and wires. Company also undertake to repair switches, motor sets. 
Turnover during preceding financial year from sale of goods is ` 59 lakhs, whereas repairing unit is ` 1 lakh.
Is M/s X & Co. eligible for composition scheme. Advice.
Answer: 
No. Since, M/s X & Co., deals partly with supply of services. Therefore, the benefit of composition scheme will be 
denied to M/s X & Co.
Example : 74 
Mr. Q is a paper merchant own 5,000 sq ft., shop at Chennai. Mr. Q offered extra space available in their shop 
to supplier to put up their advertisement. His turnover in the previous year from sale of goods ` 20 lakhs and 
advertising services ` 2 lakhs. Is Mr. Q eligible for composition scheme in the current year?
Answer: 
No. Mr. Q being a paper merchant charging services and hence, the benefit of composition scheme is not 
allowed.
Example : 75 
Hotel King Pvt., Ltd. provider of restaurant services in New Delhi. They also serve beer, whisky and so on. Turnover 
in the preceding previous year is ` 67 lakhs. Is Hotel King Pvt. Ltd. eligible for composition scheme in the current 
year?
Answer: 
Hotel King Pvt. Ltd., is not eligible for composition scheme. Since they are supplying the product, which is not 
levied to GST (namely beer, whisky).
Example : 76 
Mr. A of Chennai is a retailer dealing with cell phones. He supplies goods to the person located in Chennai and 
Pondicherry. Aggregate turnover in the preceding financial year is ` 45 lakhs. Mr. A wants to opt for composition 
scheme in the current financial year. Advise.
Answer: 
No. When the person makes inter-state supply of goods, benefit of composition scheme is prohibited. Therefore, 
Mr. A will not be entitled to the benefit of composition scheme.
Example : 77
Peter England is a trader who sells his ready-made clothes online on Amazon India (an Electronic Commerce 
Operator). He received an order for ` 12, 00,000 in the previous year. Peter England also supplied goods from 
there out lets. Aggregate turnover of the company in the previous year was ` 21,00,000.
Is Peter England eligible for composition scheme?
Answer: 
No. Peter England engaged in making supply of goods through an electronic commerce operator who is 
required to collect tax at source under section 52 of CGST Act, 2017. Hence, Peter England is not eligible for 
composition scheme.
                                                       43
Example : 78 
Hot Breads Pvt. Ltd is the supplier of bakery products registered in the current financial year (2017-18) w.e.f. 1st 
Oct 2017. In the month of Oct 2017 total taxable supplies ` 88 lakhs. 
Answer the following:
(a) Is Company eligible for Composition Scheme? 
(b) If so company wants to pay tax @ 1% being a trader. However, the Deputy Commissioner of Central Tax 
contended that the assessee is liable to pay tax @ 5% under the Food and Restaurant Services category? 
Advise.
Answer: 
(a) Hot Breads Pvt. Ltd. is eligible for composition levy in the current year.
(b) The supply of food and restaurant services category is the only service included under the composition 
scheme. For a business to be categorised as food and restaurant services, there needs to be an element of 
service involved. 
In the given case, supply of bakery products, there is only a supply of goods i.e. food items but there is no 
element of supply of service. Hence supply of bakery products is eligible to pay GST @1%, under the Traders 
category and not Food and Restaurant Services category. 
Therefore, department’s contention is not correct.
Example : 79 
Hotel King Pvt. Ltd. is a registered person under GST. P.Y. turnover was ` 100 lakhs. Applicable GST 18%.  Inputs 
cost ` 7,80,000 (exclusive of GST 18%). Profit margin is 40% on cost. Find the invoice price and advice the best 
option to pay tax if any. There is no opening balance and closing balance for the tax period.
Answer:
Composition Levy Normal Provision
Particulars Value in ` Particulars Value in `
Cost of inputs 7,80,000 Cost of inputs 7,80,000
Add: GST 18% on inputs 1,40,400 Add: GST 18% on inputs Not Cost
Total Cost 9,20,400 Total Cost 7,80,000
Add: Profit margin 40% 3,68,160 Add: Profit margin 40% 3,12,000
Invoice Price 12,88,560 Add: GST 18% CGST & SGST 1,96,560
CGST 2.5% 32,214 Invoice Price 12,88,560
SGST 2.5% 32,214 CGST 9% SGST 9%
Total GST Liability 64,428 Output Tax 98,280 98,280
Less: ITC -70,200 -70,200
Net Liability 28,080 28,080
Total Tax is ` 56,160
Conditions and Restrictions for Composition Levy (Rule 5 of Chapter II of the CGST Rules, 2017):
(a)  The person opting for the scheme must neither be a casual taxable person nor a non-resident taxable person.
(b)  The goods held in stock by him on the appointed day have not been -