Eligibility criteria for Composition Scheme for Goods

[Asked by Guest]

Is a person dealing in exempt goods eligible for composition scheme because as per section 10(2)(b) of CGST Act the registered dealer should not be engaged in supplying in non-taxable goods.And,if yes then will he pay tax @ 1% on aggregate turnover (i.e.including exempt supplies) or only on taxable supplies?

[Alkesh Jani]

Shri

The CGST Act, 2017 is amended and effective from 01.01.2020 vide Notification No. 01/2020-CT dated 01.01.2020 may please be taken into consideration.

However, the section 10(2)(b) does not states 'non-taxable' it states 'not leivable under this Act', which means to supply of goods or services to which provisions of GST is not applicable. The exempted goods or services are leviable to tax under GST Act, but are exempted under the provisions of the GST Act.

Hope this may clear your doubt.

Thanks

[KASTURI SETHI]

There is a world of difference between 'exempted goods' and 'non-taxable goods' For example ; non-taxable goods are supply of alcoholic liquor for human consumption, supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel and those goods which are exempted by virtue of notification. e.g. Threshold Exemption limit, Eggs, honey, meat, vegetables, fruits, trees, plants, news papers etc.

Section 2(47) of CGST Act “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

For traders w.e.f. 1.2.19 , rate of 1 % of turnover of taxable supplies of “Goods and Services*” in the State.

For computing Threshold for composition scheme see the definition under Section 2(112) of CGST “turnover in State” or “turnover in Union territory” 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) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess;

For threshold limit, exempt supply is to be included.

Thanks all.

So,now I will ask the dealer to pay tax @ 1% only on taxable goods and not exempt goods or nil rated goods.

AI Summary

Composition scheme eligibility: exempt supplies count for threshold but tax applies only to taxable supplies
Composition scheme eligibility depends on whether supplies are "leviable under this Act" rather than mere exemption; exempt supplies remain leviable and do not bar composition. Aggregate turnover for threshold purposes includes exempt supplies. The composition levy for traders is computed with reference to turnover of taxable supplies, so tax under the composition scheme applies to taxable supplies only, not to exempt or nil-rated supplies.