GST: Govt releases FAQs on Composition Levy

The Central Government today released Frequently Asked Questions (FAQs) on Composition levy under the new indirect tax law, GST.

The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.

It was said in the document that the person opting for composition levy will have to pay tax on quarterly basis before 18th of the month succeeding the quarter during which the supplies were made.

It was stated that aggregate turnover, for the purpose of the composition scheme would be computed on the basis of turnover on an all India basis. It will include value of all taxable supplies and exempt supplies and exports made by all persons with same PAN, but would exclude inward supplies under reverse charge as well as central, State/Union Territory and Integrated taxes and cess.

To a question, “Can a person who has opted to pay tax under the composition scheme avail Input Tax Credit on his inward supplies?”, it responded in negative. “A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed.”

Read the full text of the FAQs below.

taxscan-loader