Composition Levy – Prescribing Tax Rates

What does this Notification say?

Notification No. 8/2017 specifies the GST rates payable by taxpayers opting for the Composition Scheme under Section 10 of the CGST Act. Instead of paying GST at normal rates applicable to individual goods or services, eligible taxpayers pay tax at a concessional percentage of their aggregate turnover.

The notification prescribed different composition tax rates for different categories of businesses. Manufacturers were required to pay tax at a specified percentage of turnover, traders paid tax at a lower rate, and restaurants (not serving alcoholic liquor) had a separate composition rate. These rates have been revised from time to time through subsequent notifications.

The objective of prescribing lower tax rates is to encourage voluntary compliance among small businesses while reducing the burden of maintaining detailed GST records. Composition taxpayers are not required to issue tax invoices showing GST separately. Instead, they issue a Bill of Supply and pay tax from their own margin.

However, businesses opting for the scheme cannot claim Input Tax Credit on purchases, nor can their customers claim ITC on purchases made from composition dealers.

This notification plays an important role in making GST easier for small businesses by reducing compliance costs and simplifying tax calculation.

Example

A small restaurant registered under the Composition Scheme pays GST at the prescribed composition rate on its total turnover without calculating GST separately on every customer bill.

Key Points

• Prescribes composition tax rates.
• Different rates for manufacturers, traders, and restaurants.
• Simplifies GST calculation.
• No Input Tax Credit available.
• Bill of Supply issued instead of Tax Invoice.

One-Line Summary

Notification No. 8/2017 specifies the GST rates applicable under the Composition Scheme.