Page 9 - Chap3 Composition Levy

05. Comparison between Composition Scheme & Regular Scheme:-

Q.8: Mr. X, a trader dealing exclusively in supply of goods and paying tax under normal scheme (also eligible
for composition scheme), submit the following details for coming financial year 20XX-YY. You are required
to determine which scheme will be more beneficial to him and whether Mr. X should opt for composition
scheme. Estimated data for coming financial year 20XX-YY are as follows:

Particulars Amount (`)
Inward supplies of goods from registered suppliers (amount exclusive of GST and goods 70,00,000
chargeable to normal rate of GST @12%)

Outward supplies of goods to unregistered customers (sale price of goods inclusive of GST) - 90,00,000
Normal Rate of GST is @12%)

Other information is as given below:
(i) Inherent nature expenses ₹ 4,50,000 per year under both the schemes.
(ii) Books of account maintenance cost under normal scheme ₹ 2,00,000 yearly whereas under composition
scheme it will be ₹ 75,000 yearly.
(iii) Return filing expenses under normal scheme ₹ 48,000 yearly whereas under composition scheme it will
be ₹ 12,000 yearly. [CA Final May 23 Exam]

Answer:-
Particulars Composition Scheme (₹) Regular Scheme (₹)
Tax payable under GST law 90,000 9,64,286
[For regular scheme, Outward Supplies excluding GST [₹ 90,00,000 × 1%] [₹ 80,35,714× 12%]
= ₹ 90,00,000 * 100/112 = ₹ 80,35, 714.29

Less: ITC on inward supplies A person opting for 8,40,000
composition scheme is [₹ 70,00,000 ×
not entitled to any ITC 12%]

Net amount payable under GST law 90,000 1,24,286
[Forms part of cost]
Add: Inherent Expenses 4,50,000 4,50,000

Add: Books of Account maintenance cost 75,000 2,00,000
Add: Return filing expenses 12,000 48,000
Add: Cost of inward supplies 78,40,000 [70,00,000 + 70,00,000
(70,00,000*12%)]
Total Cost involved 84,67,000 76,98,000
Sale Proceeds 90,00,000 80,35,714
Profit Margin (Sale proceeds less Total Cost) 5,33,000 3,37,714

Conclusion: Thus, it can be concluded that Mr. X should opt for composition scheme for financial year
20XX-YY as it is more beneficial for him.
Assumption:- It has been assumed that GST is not charged on the inherent expenses, books of account
maintenance cost, and return filing expenses.

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