Section 10 - Composition levy.

THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Yes, as per the provisions of section 10, tax at specified rate is payable on "the turnover in State or turnover in Union territory"

As per the Section 2(11), the meaning of “turnover in State” or “turnover in Union territory” is as follows:

"(112) “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; "

Therefore, a registered person, paying tax u/s 10 under composition levy, has to pay tax at specified rate on exempted goods also.

 

Composition levy on exempt supplies raises eligibility ambiguity due to turnover inclusion versus ineligibility for non leviable supplies. The composition levy's tax base, as defined by turnover, expressly includes exempt supplies, indicating that composition tax is payable having regard to exempted goods; however, Section 10(2)(b) disqualifies persons making supplies 'not leviable to tax,' creating an ambiguity whether exempt supplies (which definitionally includes nil rated and wholly exempt supplies and non taxable supplies) render a person ineligible for composition. Commentators note this tension and call for clarification or amendment to reconcile the turnover inclusion with the eligibility restriction.