GST Composition Scheme Rules under GST Law

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(A) Intimation for Composition Scheme or Levy [ Rule 3 of CGST Rules, 2017 [Relevant rules]

(1) Person granted registration on Provisional Basis to File intimation [Rule 3(1)] :

Not relevant now.

(2)  Intimation in case of New Registration [Rule 3(2)] :

Any person who applies for registration under rule 8(1) may give an option to pay tax under section 10 in Part B of FORM GST REG-01. which shall be considered as an intimation to pay tax under composition levy.

Such intimation shall be considered only after the grant of registration to the applicant and his option to pay tax under composition levy shall be effective from the date from which registration is effective.

(3) Intimation in case of Shift from Regular to Composition Tax Payer [Rule 3(3)] :

A registered person who opts to pay tax under section 10 shall electronically file an intimation in FORM GST CMP-02. duly signed or verified through electronic verification code, on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, prior to the commencement of the financial year for which the option to pay tax under the aforesaid section is exercised

He shall also furnish the statement in FORM GST ITC-03 in accordance with the provisions of rule 44(4) within a period of 60 days from the commencement of the relevant financial year.

Any intimation in respect of any place of business in any State or Union territory shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number. [Rule 3(5)]

(B) Effective Date for Composition Scheme or Levy [Rule 4]

(1) The option to pay tax under section 10 shall be effective from the beginning of the financial year, where the intimation is filed under rule 3(3).

(2) The intimation under rule 3(2), shall be considered only after the grant of registration to the applicant and his option to pay tax under section 10 shall be effective from the date fixed under rule 10(2) or (3).

(C) Conditions and Restrictions for Composition Scheme or Levy [ Rule 5]

(1) Conditionsto be complied to avail composition Scheme [Rule 5(1)) :

The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:—

(i)         he is neither a casual taxable person nor a non-resident taxable person;

(ii)        the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under reverse charge under section 9(4) [Section 9(4) has been deferred till 30.6.2018] :

(iii)       he shall pay tax under section 9(3) or (4) (relating to reverse charge) on inward supply of goods or services or both [Section 9(4) has been deferred till 30.6.2018]:

(iv)       he was not engaged in the manufacture of goods as notified under section 10(2)(e), during the preceding financial year;

The Government has notified that the manufacturers of—

— ice-cream and other edible ice, whether or not containing cocoa:

Pan Masala;

— Tobacco and manufactured tobacco substitutes

shall not be eligible to opt for composition scheme.

(v)        he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him and

(vi)       he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.

(2) No need to fileintimation every year [Rule 5(2)]:

The registered person paying tax under section 10 may not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and these rules.

(D) Validity of composition Scheme or Levy [Rule 6]

(1)         The option exercised by a registered person to pay tax under section 10 shall remain valid so long as he satisfies all the conditions mentioned in the said section and under these rules.

(2)       The person referred to in rule 6(1) shall be liable to pay normal tax under section 9(1) from the day he ceases to satisfy any of the conditions mentioned in section 10 or the provisions of this Chapter and shall issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within 7 days of the occurrence of such event.

(3)       The registered person who intends to withdraw from the composition scheme shall, before the date of such withdrawal, file an application in FORM GST CMP-04. duly signed or verified through electronic verification code, electronically on the common portal.

(4)       Where the proper officer has reasons to believe that the registered person was not eligible to pay tax under section 10 or has contravened the provisions of the Act or provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within 15 days of the receipt of such notice as to why the option to pay tax under section 10 shall not be denied.

(5)       Upon receipt of the reply to the show cause notice issued under rule 6(4) from the registered person in FORM GST CMP-06. the proper officer shall issue an order in FORM GST CMP-07 within a period of 30 days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under section 10 from the date of the option or from the date of the event concerning such contravention, as the case may be.

(6) Every person who has furnished an intimation under rule 6(2) or filed an application for withdrawal under rule 6(3) or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under rule 6(5), may electronically furnish at the common portal, either directly or through a Facilitation Centre notified by the Commissioner, a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on which the option is withdrawn or denied, within a period of 30 days from the date from which the option is withdrawn or from the date of the order passed in FORM GST CMP-07as the case may be.

(7)       Any intimation or application for withdrawal under Rule 6(2) or 6(3) or denial of the option to pay tax under section 10 in accordance with rule 6(5) in respect of any place of business in any State or Union territory. shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.

(E) Rate of GST of the Composition Scheme or Levy

SI.
No.
Category of registered personsRate of tax
I.Manufacturers, other than manufacturers of such goods as may be notified by the Government, namely—
— ice-cream and other edible ice, whether or not containing cocoa;
Pan Masala;
— Tobacco and manufactured tobacco substitutes
1%
(0.5% CGST + 0.5% SGST/UTGST)
2.Supply. by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration5%
(2.5% 
CGST + 2.5% SGST/UTGST)
3.Any other supplier eligible for composition levy under section 10 and the provisions of this Chapter1%
(0.5% CGST + 0.5% SGST/UTGST)

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