CGST Rules: Chapter 2 – Composition Rules

Composition Rules

Attention GST registered taxpayers! 31st March 2018 is deadline to opt into Composition for FY 2018-19

For: Any GST registered taxpayer who want to opt for the Composition scheme for FY 2018-19;

31st March 2018 is the deadline to file the intimation in Form GST CMP-02 to opt into composition scheme for the FY 2018-19.

Follow our Step-by-step Guide to file CMP-02

Also, furnish statement in form ITC-03 within 60 days of commencement of the FY 2018-19 to declare the ITC claim that has to be reversed on inputs/capital goods in stock, in semi-finished or in finished goods.

Let us look at chapter 2 of CGST rules – Composition Rules. This text is taken from http://www.cbec.gov.in/resources//htdocs-cbec/gst/cgst-rules-01july2017%20.pdf

Intimation for Composition Levy

(1) Any person who has been granted registration on a provisional basis under clause (b) of sub-rule (1) of rule 24 and who opts to pay tax under section 10, shall electronically file an intimation in FORM GST CMP-01, 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 appointed day, but not later than thirty days after the said day, or such further period as may be extended by the Commissioner in this behalf:

Provided that where the intimation in FORM GST CMP-01 is filed after the
appointed day, the registered person shall not collect any tax from the
appointed day but shall issue bill of supply for supplies made after the
said day.

(2) Any person who applies for registration under sub-rule (1) of
rule 8 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 the said section.

(3) Any 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 and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of sub-rule (4) of rule 44 within a period of sixty days from the
commencement of the relevant financial year.

(4) Any person who files an intimation under sub-rule (1) to pay tax under section 10 shall furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts to pay tax under the said section, electronically, in FORM GST CMP-03, on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.

(5) Any intimation under sub-rule (1) or sub-rule (3) 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.

Effective Date for Composition Levy

(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 subrule (3) of rule 3 and the appointed day where the intimation is filed under sub-rule (1) of the said rule.

(2) The intimation under sub-rule (2) of rule 3, 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 sub-rule (2) or (3) of rule 10.

Conditions and Restrictions for Composition Levy

(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:-

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

(b) the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 3;

(c) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under
sub-section (4) of section 9;

(d) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both;

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

(f) 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

(g) 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) 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.

Validity of Composition Levy

(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 sub-rule (1) shall be liable to pay tax under
sub-section (1) of section 9 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 seven 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 fifteen 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
sub-rule (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 thirty
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 sub-rule (2) or
filed an application for withdrawal under sub-rule (3) or a person in
respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under sub-rule (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 thirty days from the date from which the option is withdrawn or from the date of the order passed in FORM GST CMP-07, as the case may be.

(7) Any intimation or application for withdrawal under sub-rule (2) or (3)
or denial of the option to pay tax under section 10 in accordance with
sub-rule (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.

Rate of Tax of the Composition Levy

The category of registered persons, eligible for composition levy under section 10 and the provisions of this Chapter, specified in column (2) of the Table below shall pay tax under section 10 at the rate specified in column (3) of the said Table:- (Please note that these rates are for CGST only. The actual rates are doubled when you add both CGST & SGST)

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