Page 8 - Chap3 Composition Levy

04. Combined Questions on Sec 10:-

Q.7: Answer the following questions independently:-
1. Miss Minal is a trader who is engaged in supply of ice cream. During the financial year 20XX-YY, her total
value of supplies was `1,52,40,000 of which value of inward supplies of goods chargeable under RCM
was `5,40,000. For 1st quarter of financial year 20YY-ZZ, the turnover from taxable supplies of goods
was `1,08,50,000. Determine whether Miss Minal is eligible to apply for composition scheme.
2. M/s XYZ Ltd. (Maharashtra) started its business on 01.04.20XX & is engaged in trading business of
stationery products. The details of its turnover for financial year 20XX-YY are as follows:-
- Intra state supply of product P = ` 75,00,000
- Intra state supply of product P through ECO = ` 5,00,000
- Inter state supply of product P = `2,00,000
XYZ Ltd. decided to continue the supply of product P through ECO in financial year 20YY-
ZZ and also decided to supply product P only within Maharashtra. Explain whether, XYZ Ltd. can opt
for composition scheme in financial year 20YY-ZZ.
3. Can a registered person, who purchases goods or obtains services from a taxable person paying tax under
the composition scheme, avail credit of tax paid on purchases made or services availed from
composition dealer?
4. Can the option to pay tax under composition levy be exercised at any time of the year?
5. Can a person paying tax under composition scheme make supplies of goods to SEZ?
Answer:
Ü As per section 10(2)(e) of CGST Act, 2017, a manufacturer of goods notified by the government shall not
1.
be eligible to opt for Composition levy.
Ü As manufacturer of ice cream is one amongst the notified category by the Government.
Ü In the given case, as Miss Minal is engaged in trading of ice cream and not in manufacturing, she can
avail the benefit of Composition levy.

2. Ü As per sec 10(1), A Registered Perosn, whose aggregate turnover in the PFY did not exceed `1.5 Cr
may opt to pay tax under composition levy
Ü As per section 10(2)(d) of the said act, the persons making any supply of services through an electronic
commerce operator who is required to collect tax at source under section 52 shall not be eligible to opt for
Composition levy.
Ü In the present case, the aggregate turnover of XYZ ltd. is `82, 00,000/ (`75, 00,000+ `5, 00,000+ `2,00,000).
Ü The restriction is on services supplied through such ECO & not goods.
Ü Also, the compliance of conditions of section 10(2) are to be checked in current financial year &
accordingly, XYZ ltd. is not making any inter state supply of goods in financial year 20YY-ZZ.
Ü Thus, XYZ ltd. is eligible to opt for composition scheme in financial year 20YY-ZZ.

3. No, as per section 10(4) of CGST Act, 2017, a composition dealer cannot collect tax paid by him on outward
supplies from his customers as he has to issue bill of supply instead of tax invoice & also, he cannot avail
credit of tax paid by him.

4. Ü No, the registered person is required to opt for the composition scheme prior to the commencement of the
relevant financial year, if he is eligible to opt for the scheme.
Ü However, if person applied for registration in between the year, then he can opt for composition
scheme during such year by filling the details in Part B of FORM GST REG-01.

5. Ü No, supplies to SEZ from domestic tariff area will be treated as inter-State supply & as per section
10(2)(c) of CGST Act, 2017, one of the conditions is that the person paying tax under composition
scheme cannot make inter-state outward supply of goods/services.
Ü Thus, for making supplies to an SEZ unit, a person needs to take registration as a regular taxpayer.

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