Composition Scheme for Scrap dealers.

[BVC&Co CharteredAccountants]

A dealer who buys all types of scrap from unregistered suppliers and sells it to registered/unregistered persons. Query is whether such dealer can opt for composition scheme ( subject to threshold limit Rs.1.5 Crores ) and pay output tax at 1% irrespective of the rate of tax applicable for each type of scrap items. and also RCM is NOT applicable on his purchases from unregistered dealers u/s 9(3) of CGST Act.

[Amit Agrawal]

There is no restriction under sub-section (1), read with sub-section 2, of Section 10 of the CGST, 2017 to opt for composition scheme merely because the person is trader / dealer in 'scrap'.

And registered person - who has opted for above said composition scheme - is also not liable to pay gst under RCM u/s 9 (3) of the CGST Act, 2017 against purchase of scrap from unregistered suppliers unless & until the supplier is 'Central Government, State Government, Union territory or a local authority' as per Notification No.4/2017-Central Tax (Rate) (as amended from time to time, till date).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

A composition dealer cannot purchase goods from unregistered person.

[Amit Agrawal]

Dear Shri Kasturi Sethi Ji,

I am not aware about blanket restriction (if any) upon a composition dealer to purchase goods from unregistered person.

Request you to kindly let me know relevant provision / rules / notification in this regard.

Thanks and regards

[KASTURI SETHI]

Dear Sir, Re-examined the issue. I agree with your reply entirely.

[BVC&Co CharteredAccountants]

Thank you Amith sir for clarifying the issue with applicable provisions and also Kasturi sir.

[Padmanathan KV]

Considering the facts in this case, there is no bar/ restriction in opting for composition scheme. However once composition scheme is opted, the dealer cannot make any inter-state supply. Thus, dealer can opt for composition scheme provided his scrap sale is within the state only. Regarding RCM, purchases from unregistered suppliers is not liable to RCM basis.

AI Summary

Composition scheme eligibility for scrap traders confirmed; intrastate-only supply restriction applies and reverse charge generally not triggered. A dealer in scrap is not precluded from opting for the composition scheme solely because of being a trader in scrap, subject to the turnover threshold; however, composition taxpayers cannot make inter state supplies. Purchases of scrap from unregistered suppliers do not attract the reverse charge mechanism for a composition dealer, except where the supplier falls within the specific governmental/local authority category noted in the applicable rate notification.