GST Composition Levy

Posted on 25 April 2023 Category : GST Law

What is Composition levy under GST?

If a registered GST taxable person’s aggregate annual turnover is lesser than a particular amount fixed by the GST authorities, an amount calculated or prescribed by the GST authorities not less than 1% of total turnover is permitted for such tax payer in lieu of tax payable by him if his supply of goods and services are within the state.

Is Composition of levy of GST is allowed for interstate supply of goods and services?

No, composition levy of GST is not allowed for state to state supply of goods and services.

The quote from GST model law about composition of levy is extracted below:

“ Notwithstanding anything to the contrary contained in the Act but subject to subsection (3) of section 7, on the recommendation of the Council, the proper officer of the Central or a State Government may, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in a financial year does not exceed [fifty lakh of rupees], to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than one percent of the turnover during the year: Provided that no such permission shall be granted to a taxable person who effects any inter-State supplies of goods and/or services. Provided further that no such permission shall be granted to a taxable person unless all the registered taxable persons, having the same PAN as held by the said taxable person, also opt to pay tax under the provisions of this sub-section.

A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under sub-section (1), such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty equivalent to the amount of tax payable as aforesaid: Provided that no penalty shall be imposed without giving a notice to show cause and without affording a reasonable opportunity of being heard to the person proceeded against.”

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