Composition scheme on sale of MRP products

[adi sankar]

Dear Sir/Mam,

My query is when a medical shop owner who is registered under composition scheme is selling medicines (all are B2Cs only), then whether

a) He can charge MRP straight away and pay 1% GST on such MRP or;

b) reduce the deemed taxes from MRP and then pay 1% GST on the net amount which is arrived after reducing the deemed taxes.

This is because as MRP products are deemed to be inclusive of taxes and a composition dealer is not eligible to collect taxes.

[Sadanand Bulbule]

As a composition trader, you need to pay !% tax out of your pocket on the value of supply of goods, irrespective of MRP concept, subject to the threshold limit prescribed.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, I agree with you. In this situation, MRP is foundation (it being landed cost) for transaction value of the product to be charged by a Composition Dealer.

A composition dealer can purchase the goods only from registered dealer and thus he pays GST to his supplier. He (Composition dealer) does not charge any tax from his buyer. Thus the component of GST included in MRP is borne by the composition dealer itself and not by his buyer.

[Sadanand Bulbule]

Dear Sirji

Thank you so much for your validation in clear terms.

[adi sankar]

Dear Sirs,

Thanks a lot for your valuable replies.

So what I have understood is that the composition dealer can charge MRP on the buyer and pay 1% GST on such MRP out-of-pocket. Am I right sir?

AI Summary

Composition Dealers Must Pay 1% GST on Supply Value; Cannot Collect Tax from Buyers or Alter MRP. A medical shop owner, registered under the GST composition scheme, inquired about charging MRP for medicines and paying GST. The question was whether to charge MRP directly and pay 1% GST or reduce deemed taxes from MRP before paying 1% GST. Responses clarified that a composition dealer must pay 1% GST from their pocket on the supply value, regardless of MRP. The MRP, inclusive of taxes, is the transaction value, and the dealer cannot collect taxes from buyers. The dealer pays GST to suppliers, and the GST component in MRP is not passed to buyers.