Section 10 of CGST Act

Composition levy

 

Enforced with effect from 22-6-2017.

 

Section 10(1)

Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9,

a registered person,

whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees,

may opt to pay, [in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate] as may be prescribed, but not exceeding,

 

(a) one percent of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half percent of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half percent of the turnover in State or turnover in Union territory in case of other suppliers,

subject to such conditions and restrictions as may be prescribed:

 

• See rules 3 to 8, 11, 40, 44, 62 and 80 and Form Nos. GST-CMP 1 to GST-CMP 8 and REG-1, GSTR 4/GSTR 9A, GSTR 9C and ITC-01, ITC-03 of the CGST Rules, 2017.

 

• See also Central Goods and Services Tax (Removal of Difficulties) Order, 2019 and UTGST (Removal of Difficulties) Order, 2019.

 

• For registered person whose aggregate turnover in preceding financial year did not exceed one crore and fifty lakh rupees or registered person whose aggregate turnover in year in which such person has obtained registration is likely to be less than one crore and fifty lakh rupees and who did not opt for composition levy under section 10, see Notification No. 66/2017-Central Tax, dated 15-11-2017.

 

• For notified rate, turnover and other conditions under section 10(1), see Notification No. 14/2019-Central Tax, dated 7-3-2019.

 

• For notified class of registered persons who shall follow special procedure for furnishing of return and payment of tax, see Notification No. 21/2019-Central Tax, dated 23-4-2019.

 

Substituted for “in lieu of the tax payable by him, an amount calculated at such rate”, by The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force w.e.f. 01-02-2019.

 

 

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding [one crore and fifty lakh rupees], as may be recommended by the Council:

 

Substituted for “one crore rupees” by The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force w.e.f. 01-02-2019.

 

Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten percent of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher]

 

Inserted by The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force w.e.f. 01-02-2019. See also Central Goods and Services Tax (Removal of Difficulties) order, 2019, dated 01-02-2019.

 

Explanation: For the purposes of second proviso, the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account for determining the value of turnover in a State or Union territory.

{Inserted by Finance Act (No. 2) Act, 2019, w.e.f. 1-1-2020}

 

Section 10(2)

The registered person shall be eligible to opt under sub-section (1), if: —

 

(a) save as provided in sub-section (1), he is not engaged in the supply of services;

Substituted by the Central Goods and Services Tax (Amendment Act, 2018, w.e.f. 1-2-2019.

Prior to its substitution, clause (a) read as under:

“(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of schedule II;”

 

 

(b) he is not engaged in making any supply of goods [or services] which are not leviable to tax under this Act;

 

(c) he is not engaged in making any inter-State outward supplies of goods [or services].

 

(d) he is not engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52; and

 

• Words “goods or” omitted by the Finance Act, 2023, w.e.f. 1-10-2023. Earlier, the italicised word was inserted by the Finance Act, 2020, w.e.f. 1-1-2021.

 

• Word “Services” Inserted by the Finance Act, 2020, w.e.f. 1-1-2021.

 

• Word "and" omitted by the Finance (No. 2) Act, 2019, w.e.f. 1-1-2020.

 

 

(e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council; and  

Substituted for "Council:", by the Finance (No. 2) Act, 2019, w.e.f. 1-1-2020.

 

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

Inserted, by the Finance (No. 2) Act, 2019, w.e.f. 1-1-2020.

 

Provided that where more than one registered person is having the same Permanent Account Number [issued under the Income-taxAct,1961 (43 of 1961)], the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

 

Section (2A)

{Inserted, by the Finance (No. 2) Act, 2019, w.e.f. 1-1-2020}

Notwithstanding anything to the contrary contained in this Act, but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, not eligible to opt to pay tax under sub-section (1) and sub-section (2), whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding three per cent of the turnover in State or turnover in Union territory, if he is not-

(a) engaged in making any supply of goods or services which are not leviable to tax under this Act;

 

(b) engaged in making any inter-State outward supplies of goods or services;

 

(c) engaged in making any supply of goods or

services through an electronic commerce operator who is required to collect tax at source under section 52;

{Words “goods or” omitted by the Finance Act, 2023, w.e.f. 1-10-2023}

 

(d) a manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council; and

 

(e) a casual taxable person or a non-resident taxable person:

Provided that where more than one registered person are having the same Permanent Account Number issued under the Income-tax Act, 1961 (43 of 1961), the registered person shall not be eligible to opt for the scheme under this sub-section unless all such registered persons opt to pay tax under this sub-section.

 

Section 10(3)

The option availed of by a registered person under sub-section (1) [or sub-section (2A), as the case may be] shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1) [or sub-section (2A), as the case may be.]

 

Section 10(4)

A taxable person to whom the provisions of sub-section (1) [or sub-section (2A), as the case may be] apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

 

Section 10(5)

If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) [or sub-section (2A), as the case may be] despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 [or section 74A]

shall, mutatis mutandis, apply for determination of tax and penalty.

 {Inserted, by the Finance (No. 2) Act, 2024, w.e.f. 1-11-2024}

 

Explanation 1. – For the purposes of computing aggregate turnover of a person for determining his eligibility to pay tax under this section, the expression “aggregate turnover” shall include the value of supplies made by such person from the 1st day of April of a financial year up to the date when he becomes liable for registration under this Act, but shall not include the value of exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

{Inserted, by the Finance (No. 2) Act, 2019, w.e.f. 1-1-2020}

 

Explanation 2. – For the purposes of determining the tax payable by a person under this section, the expression “turnover in State or turnover in Union territory” shall not include the value of following supplies, namely: –

(i) supplies from the first day of April of a financial year up to the date when such person becomes liable for registration under this Act; and

(ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.