Page 4 - Chap3 Composition Levy

01. Composition levy u/s 10(1) & 10(2):-

Eligibility based on Aggregate Turnover & Computation of tax in C.F.Y. under composition levy
u/s 10(1) & 10(2) (involves calculation of marginal service, impact of interest on loan, etc.):-

Q.1: Mr. Yash, doing business in the State of Kerala, commenced his business in the month of April and
provides the following further information.
(i) His intra-State turnover for the first two quarters was as follows:
April - June - ` 20 lakh
July - September - ` 100 lakh
(ii) In each of the quarters, exempt supply made by him was 25% of the total turnover for the said quarter.
(iii) Since the product supplied by him was eligible for composition scheme, he opted for registration under
composition scheme with effect from 1st July.
You are required to compute the tax payable by Mr. Yash under GST law from the above information:
(i) If he is a manufacturer
(ii) If he is a trader. [Study Mat] [CA Final Jul 21 Exam]
Answer: Legal Provision:-
Ü As per section 10 of CGST Act, 2017 read with rule 7 of CGST Rules, 2017, a registered person opting for
composition levy for goods pays tax at the rates mentioned below during the current FY, in lieu of the tax
payable by him under regular scheme:
Sr. Categories of registered person CGST SGST/ Total Basis of Calculation
No Rate UTGST Rate Rate
1 Manufacturers 0.5% 0.5% 1% Turnover in State or UT
[wholly exempt+ Nil+
Taxable Supply]
2 Suppliers making supplies referred to in Clause (b) Turnover in State or UT
of para 6 of sch II
[wholly exempt+ Nil+
Example - Restaurant, Catering, Mess or any other 2.50% 2.50% 5%
service contract where goods as food or drink is Taxable Supply]
supplied for human consumption

Turnover of taxable
3 Other Suppliers (Normally Traders) 0.50% 0.50% 1%
(i.e.chargeable) SOG &
SOS in State or UT
Discussion & Conclusion:-
(i)If Mr. Yash is a manufacturer:-
CGST = ₹100 lakh x 0.5% = ₹ 50,000
SGST = 100 lakh x 0.5% =₹ ₹ 50,000
(ii)If Mr. Yash is a trader:-
CGST = ₹ 75 lakh (as 25% of turnover is exempt) x 0.5% = ₹ 37,500
SGST = ₹ 75 lakh (as 25% of turnover is exempt) x 0.5% = ₹ 37,500.

Q.2: Mr. Rajbeer, a registered person at Delhi, is in the business of selling goods relating to interior
decoration under the firm name M/s. Rajbeer & Sons. He has opted for composition scheme for the financial
year 20XX-YY. His turnover for current FY ` 80 lakh and is expected to achieve ` 130 lakh in financial year
20YY-ZZ. Discuss whether M/s Rajbeer & Sons can still enjoy the benefits of composition scheme in
financial year 20YY-ZZ.
His son Karan wants to start business of providing services relating to interior decoration, after completing
post-graduation course in interior decoration under same firm name M/s Rajbeer & Sons with effect from
1st April of financial year 20YY-ZZ and wants to enjoy the benefits of composition scheme under GST.
Advise Mr. Rajbeer and his son Karan. [Study Mat] [CA Final Nov 19 Exam]

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