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 scheme liability: composition dealers must bear GST on MRP and cannot charge it to customers.
A composition dealer cannot collect tax from the buyer and must bear the GST liability himself; where goods are sold at MRP (deemed tax-inclusive), the composition levy is calculated on the transaction value represented by the MRP and the tax component embedded in MRP is borne by the dealer, who charges MRP to the customer without separately stating tax and pays the composition tax out of pocket.