Simpler GST for small & local businesses (Composition Levy)

GST will replace most of the existing local taxes. And bring about a massive change in how indirect taxes are collected. But if you are a small business you may be worried about your compliance going up?

To help small businesses avoid the hassles of collecting GST, claiming input credit etc the Model GST law has proposed a simpler levy. This levy is called Composition Levy.

  • Those with turnover of Rs 50 lakhs or less can opt for this levy. (Note that this is optional).
  • Instead of collecting GST you will pay a certain % of levy. This levy or tax will be not less than 1% of the turnover of the financial year. The government will announce the levy % in due course.
  • This levy cannot be availed by those who make inter-state supply of goods/services. It can only be availed by those who make intra-state supply of goods/services
  • This levy is linked to your PAN. So if you have opted it for a business with a particular PAN, composition levy shall apply to all your businesses with the same PAN
  • No input credit shall be allowed to be claimed by you
  • GST or any other tax shall not be collected by you from the recipient of your supplies.


If a business has opted for composition levy without meeting the conditions above, penalty shall apply. Penalty may be as much as the tax actually payable under GST. The business will be given a notice and allowed an opportunity to show cause.