Composition Levy in Gst Regime

Composition Levy in Gst Regime

Every day, all of us check out stores and shops in our locality that utilize basic paper for bills instead of the proper bills. You won’t find accounts books or records regarding their sales and Purchase as well as stock.

It doesn’t mean they are tax-free. They’ve chosen to use composition schemes, in which they pay a specific amount to avoid tax and are tax-compliant.

Taxpayers of a particular kind have a difficult time complete the compliance requirement of the tax laws due to their dimensions or size of their operations. Are you one of the few. The cost of reclaiming taxes from these kinds of tax payers is significantly higher in percentage than the tax that they collect. But that doesn’t mean they don’t have to pay taxes.

To achieve this dual purpose of reducing the burden for tax collectors and tax payer, a particular Composition scheme is offered to tax payers by which taxpayers pay taxes using calculations based on a element instead of tax determined based on complex calculations required by the law.

Similar to what you will find in Section 8 of the Model GST law.

What is Composition Levi

(Notwithstanding anything else in the Act however, subject to subsection (3) in section 7 upon the advice of Council the officer in charge or the Central or a State Government may, subject to the conditions and limitations as may be prescribed allow a tax-paying person who is registered who’s total turnover during an financial year is not exceed [fifty lakhs of rupeesin the year) and who is able to pay. instead of tax owed by him. An amount that is calculated at a amount as is specified, but not lower that one percent annual turnover.

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The Scheme as per Model Law

An annual gross turnover of the amount of Rs. 50 lakhs will be made available to the tax-paying person.

The amount should not lower than 1 percent of total turnover for the year.

The supply or services offered within the state of interstate cannot be considered qualified for it.

Taxes will not be taken by such a person for supplies supplied by him.

The Input Tax Credit will not be entitled to any claim.

– Full Analysis of Feature of the Scheme. Section 2(6) contain a full definition of the term “aggregate turnover,” which is the sum of all tax-deductible and non-taxable supplies including exempt supplies as well as exports of goods and services by an individual who is the same permanent account number.

– In lieu Goods and Service Tax not less than 1 percent of the total turnover is due.

It’s still unclear which amount will be calculated based on the aggregate turnover or tax-deductible turnover.

There is no tax paid by the tax payer on the goods and services provided by him. If he doesn’t have to collect taxes on the products he makes so to issue sales invoices or keeping the records of his revenue is an incorrect assumption.

Input Tax Credits can’t be claimed by the Taxpayer.


Services Tax and the State Tax Laws as of today have the option of composition schemes. Different providers are going to pursue different kinds of schemes. Thus, the schemes should be designed keeping the business’s nature in mind in relation in size the business.

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The value of input supplies as a percentage of the Supplier of Goods the amount of composition levy must to be set as if expecting that these suppliers keep books of their revenue is an to be impossible.

The percentage of tax-exempt turnover will determine the amount of levied, and not the proportion of the aggregate turnover, otherwise it would be unfair to those with non-taxable or exempted turnover.