Composition Scheme under Section 10(2A) of the CGST Act

[Fahiyaz Ahmmed]

My friend has developed a dating application that offers digital matchmaking services and charges users a subscription fee. Payments are collected through Razorpay (a payment gateway). There is no supply of goods, and the services are provided directly to users without involving any e-commerce operator required to collect TCS under Section 52 of the CGST Act. The annual turnover is below ?50 lakhs. Under these conditions, is my friend eligible to opt for the Composition Scheme under Section 10(2A) of the CGST Act

[Sadanand Bulbule]

Considering the facts of your case, refer Notification No. 2/2019-Central Tax (Rate) dated 7th March, 2019 for availing composition scheme under Section 10(2A) of the CGST Act, 2017.

[Fahiyaz Ahmmed]

THANK YOU SIR

[Shilpi Jain]

An important condition to be able to opt for this composition scheme is that there should not be any inter-State supply i.e. where your location and location of customer are in different States

[KASTURI SETHI]

Dear Querist,

Explore the possibility of your service falling in the category of OIDAR. See Boards Flyer No.43 dated 1.1.18

[Fahiyaz Ahmmed]

A heartfelt thank you to all the experts here for sharing your knowledge 

[YAGAY and SUN]

The assessee is engaged in providing online digital matchmaking services through a mobile application and collects subscription fees from users via Razorpay, a payment gateway. The services are rendered directly to users, without the involvement of any e-commerce operator liable to collect tax at source under Section 52 of the CGST Act, 2017. The aggregate turnover remains below ?50 lakhs in the preceding financial year.

Section 10(2A) of the CGST Act, 2017, introduced via the Finance (No. 2) Act, 2019 and operational from 01.04.2020, permits a registered person engaged exclusively in the supply of services to opt for the composition scheme, provided their aggregate turnover does not exceed ?50 lakhs. The applicable tax rate is 6% (3% CGST + 3% SGST), as notified under Notification No. 2/2019-Central Tax (Rate) dated 07.03.2019.

The said notification allows such service providers to pay tax under the composition route, subject to the condition that they are not engaged in making supplies through an e-commerce operator required to collect tax under Section 52. Since Razorpay is a payment aggregator and not an e-commerce operator as defined in the Act, the restriction under Section 10(2A) is not attracted.

Further, the applicability of OIDAR (Online Information and Database Access or Retrieval) services under Section 2(17) of the IGST Act, 2017 must be examined. As per CBIC Flyer No. 43 dated 01.01.2018, OIDAR services typically include online delivery of digital content with minimal human intervention, such as cloud services or data access from a foreign supplier. The assessee operates domestically and provides interactive services directly to Indian users. Hence, the service does not squarely fall within the scope of OIDAR, which primarily applies to cross-border B2C transactions.

Conclusion: The assessee, being a domestic supplier of digital matchmaking services with turnover below ?50 lakhs, not supplying through an e-commerce operator under Section 52 and not falling within the scope of OIDAR, is eligible to opt for the composition scheme under Section 10(2A) of the CGST Act, 2017, read with Notification No. 2/2019-Central Tax (Rate) dated 07.03.2019.

[Fahiyaz Ahmmed]

but there is a high possibility that customers from other states may also subscribe to the services once the app is online. Will this violate the basic condition of the scheme, particularly the restriction on inter-state supply

[Sadanand Bulbule]

Dear Sir

A taxpayer wishing to enjoy the benefits of composition levy of tax cannot push its compound walls to suit his desires. Walls are immovable, not flexible.

[Fahiyaz Ahmmed]

Thank you Sir I understand now  the conditions under the Composition Scheme are fixed and must be followed strictly. Your explanation using the compound wall analogy made it very clear. Grateful for your guidance

AI Summary

Composition scheme eligibility for service providers depends on exclusive domestic supplies and absence of e commerce operator supplies.
Eligibility for the composition scheme under Section 10(2A) requires exclusive engagement in supplying services with aggregate turnover below the statutory threshold, no supplies through an e commerce operator required to collect tax at source, and no inter state supplies. Payment collection via a payment aggregator does not automatically disqualify eligibility if the aggregator is not an e commerce operator. Domestically operated, interactive matchmaking services supplied directly to Indian users ordinarily fall outside the core OIDAR classification and thus do not by themselves prevent composition election.