Section 10
Section 10 of the CGST Act, 2017 – Composition Levy
Section 10 provides a simplified GST scheme for small taxpayers.
The objective is to reduce compliance burden by allowing eligible businesses to pay GST at a fixed percentage of turnover instead of following regular GST procedures.
Who Can Opt for Composition Scheme?
A registered person can opt for the Composition Scheme if:
- Aggregate Turnover in the preceding financial year does not exceed ₹1.50 Crore.
- For specified Special Category States, the limit is generally ₹75 Lakh.
- The business satisfies the prescribed conditions under the CGST Act and Rules.
Special Provision for Service Providers [Section 10(2A)]
Service providers (and mixed suppliers) can opt for the Composition Scheme if:
- Aggregate turnover in the preceding financial year does not exceed ₹50 Lakh.
Composition Tax Rates
|
Category of Taxpayer |
Composition Rate |
|
Manufacturers (other than notified goods) |
1% of turnover (0.5% CGST + 0.5% SGST) |
|
Traders / Suppliers of Goods |
1% of taxable turnover (0.5% CGST + 0.5% SGST) |
|
Restaurants (not serving alcohol) |
5% of turnover (2.5% CGST + 2.5% SGST) |
|
Service Providers under Section 10(2A) |
6% of turnover (3% CGST + 3% SGST) |
Main Benefits
✅ Lower tax burden for small businesses
✅ Simplified compliance
✅ Reduced record-keeping requirements
✅ Quarterly tax payment and simplified return filing
Main Restrictions
❌ Cannot collect GST separately from customers
❌ Cannot claim Input Tax Credit (ITC)
❌ Cannot issue Tax Invoice
❌ Must issue a Bill of Supply
❌ Certain businesses are not eligible (e.g., certain manufacturers, e-commerce operators collecting TCS, etc.)
Example
Trader under Composition Scheme
Annual Turnover = ₹1.20 Crore
Composition Tax Rate = 1%
GST Payable = ₹1,20,000
No GST can be charged separately to customers and no ITC can be claimed.
When Composition Scheme Becomes Inapplicable
The taxpayer must shift to the regular GST scheme if:
- Turnover exceeds ₹1.50 Crore (or applicable limit).
- Eligibility conditions are violated.
- The taxpayer voluntarily opts out.
Easy One-Line Summary
Section 10 allows small businesses with turnover up to ₹1.50 Crore (₹50 Lakh for specified service providers) to pay GST at a concessional fixed rate with simplified compliance, but without collecting GST separately or claiming ITC.
The content provided in this article is intended solely for educational and informational purposes and should not be construed as professional accounting, taxation, legal, or financial advice. Readers are advised to consult a qualified professional before making any financial, tax, legal, or business decisions based on the information contained herein.Disclaimer