Tax on Exempted Goods in Composition Scheme

In this blog, we will be discussing payment of Tax on Exempted Goods in Composition Scheme under section 10 of GST Act 2017. Do read the complete blog for complete information.

GST Composition Scheme Turnover Limit 2021-22

A taxpayer whose aggregate turnover* is up to Rs 1.5 crore can opt for Composition Scheme. 

In case of Special Category of states the turnover limit is 75 lakhs. Such states are:

In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75 lakh. 

  • Arunachal Pradesh,
  • Assam,
  • Manipur,
  • Meghalaya,
  • Mizoram,
  • Nagaland,
  • Sikkim,
  • Tripura,
  • Himachal Pradesh

*Aggregate Turnover in GST for Composition Dealer

As per Section 2(6), “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Tax rate for Composition Dealer (Section 10)

(i) 2% of the turnover in State* in case of a manufacturer,
(ii) 5% of the turnover in State* in case of persons engaged in making supplies of restaurant services, and
(iii) 1% of the turnover in State* in case of other suppliers.

*Turnover in State in GST for Composition Dealer

Turnover in State means, “the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and interState supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess.”

Read about GST Portal Latest Changes

The Question:

So, if “turnover in state” includes exempt Supply, then, can we say, Tax on Exempted Goods to be paid in Composition Scheme?

Answer

So, the answer is “NO”. The person mentioned in clause (iii) of Section 10 above, shall have to pay 1% tax on “turnover of taxable supply of goods.”

This is notified by Notification 1/2018 (Central Tax) dated 1st January 2018.

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