Section 10 of CGST Act 2017: Composition Levy

Provisions under Section 10 of the Central Goods and Services Tax (CGST) Act, 2017 relating to “Composition Levy”, are as under:

Section 10 of CGST Act 2017: Composition Levy (CHAPTER III – LEVY AND COLLECTION OF TAX)

(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount of tax calculated at such rate in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate, as may be prescribed, but not exceeding,– [Refer Note 2(a)]

(a) one per cent of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent of the turnover in State or turnover in Union territory in case of other suppliers

subject to such conditions and restrictions as may be prescribed.

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees one crore and fifty lakh rupees, as may be recommended by the Council. [Refer Note 2(b)]

Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher. [Refer Note 2(c)]

Explanation.- For the purposes of second proviso, the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account for determining the value of turnover in a State or Union territory. [Refer Note 3(a)]

(2) The registered person shall be eligible to opt under sub-section (1), if:—

(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II save as provided in sub-section (1), he is not engaged in the supply of services. [Refer Note 2(d)]

(a) save as provided in sub-section (1), he is not engaged in the supply of services;

(b) he is not engaged in making any supply of goods or services which are not leviable to tax under this Act; [Refer Note 4]

(c) he is not engaged in making any inter-State outward supplies of goods or services; [Refer Note 4]

(d) he is not engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52; and [Refer Note 3(b) & 4]

(e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council, and [Refer Note 3(c)]

(f) “he is neither a casual taxable person nor a non-resident taxable person: [Refer Note 3(d)]

Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

(2A) Notwithstanding anything to the contrary contained in this Act, but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, not eligible to opt to pay tax under sub-section (1) and sub-section (2), whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding three per cent. of the turnover in State or turnover in Union territory, if he is not–

(a) engaged in making any supply of goods or services which are not leviable to tax under this Act;

(b) engaged in making any inter-State outward supplies of goods or services;

(c) engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52;

(d) a manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council; and

(e) a casual taxable person or a non-resident taxable person:

Provided that where more than one registered person are having the same Permanent Account Number issued under the Income-tax Act, 1961, the registered person shall not be eligible to opt for the scheme under this sub-section unless all such registered persons opt to pay tax under this sub-section. [Refer Note 3(e)]

(3) The option availed of by a registered person under sub-section (1) or sub-section (2A), as the case may be, shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1) or sub-section (2A), as the case may be. [Refer Note 3(f)]

(4) A taxable person to whom the provisions of sub-section (1) or, as the case may be, sub-section (2A) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax. [Refer Note 3(g)]

(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) or sub-section (2A), as the case may be, despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty. [Refer Note 3(h)]

Explanation 1.– For the purposes of computing aggregate turnover of a person for determining his eligibility to pay tax under this section, the expression “aggregate turnover” shall include the value of supplies made by such person from the 1st day of April of a financial year up to the date when he becomes liable for registration under this Act, but shall not include the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. [Refer Note 3(i)]

Explanation 2.– For the purposes of determining the tax payable by a person under this section, the expression “turnover in State or turnover in Union territory” shall not include the value of following supplies, namely:–

(i) supplies from the first day of April of a financial year up to the date when such person becomes liable for registration under this Act; and

(ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. [Refer Note 3(i)]

Amendments History:

1. CBEC notifies 22/06/2017 as the Commencement date for Section 10 of the CGST Act 2017, vide Central Tax Notification 1/2017 dt. 19/06/2017.

2. Amendments made vide Section 5 of the CGST (Amendment) Act, 2018 (GOI Notification dt. 29/08/2018), followed with Central Tax Notification 2/2019 dt. 29/01/2019 on commencement date of 01/02/2019:

a) in Section 10(1), the text ‘in lieu of the tax payable by him, an amount calculated at such rate’ substituted with the text ‘in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate’;

b) in the proviso to Section 10(1), the words ‘one crore and fifty lakh rupees’ substituted for the words ‘one crore rupees’; 

c) Second Proviso to sub-section (1) inserted;

d) clause (a) of sub-section (2) substituted;

3. Amendments made vide Section 93 of the Finance Act, 2019: GOI Notification dt. 01/08/2019, pending notification on commencement date:

a) Explanation inserted after second proviso to sub-section (1);

b) in clause (d) of sub-section (2), the word ‘‘and’’ occurring at the end shall be omitted;

c) in clause (e) of sub-section 92), for the word ‘‘Council:’’, the words ‘‘Council; and’’ shall be substituted;

d) Clause (f) inserted in sub-section (2).

e) Sub-section (2A) inserted.

f) in sub-section (3), the text “or sub-section (2A), as the case may be,” inserted after the text “under sub-section (1)” at both the places where they occur;

g) in sub-section (4) the text “or, as the case may be, sub-section (2A)” inserted after the text “of sub-section (1)”; 

h) in sub-section (5) the text “or sub-section (2A), as the case may be,” inserted after the text “under sub-section (1)”, and

i) Explanation 1 and 2 inserted after Section 10(5).

4. The text “or services” inserted after the text “of goods” in clauses (b), (c) and (d) of section 10(2) vide Section 119 of the Finance Act 2020: GOI Notification dt. 27/03/2020, pending notification on commencement date.

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Note: The CGST Act, 2017 has been notified vide GOI Notification dt. 12/04/2017, which has subsequently been amended through CGST (Extension to J&K) Act 2017, Finance Act 2018, CGST Amendment Act 2018, Finance (No. 2) Act 2019, Finance Act 2020, Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020, Finance Act 2021, including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective CGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of Amendments made by all such Notifications, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.

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  1. PRASAD
    • Esha Agrawal
  2. SK JHA
  3. RAHUL Chandrabhavi