Composition and exempted sale tax
This query is : Resolved
25 November 2025
In case of composition, whether 1% tax is to be paid on exempted sale also ?
25 November 2025
For Traders (Composition Dealers in Goods)
- Exempt supplies are excluded from tax liability.
- They only pay 1% (or applicable rate) on taxable turnover.
- While filing CMP-08, composition dealers must report exempt supplies separately under “Outward supplies (including exempt supplies).”
- Even though traders don’t pay tax on exempt sales, they must disclose them for compliance.
- Exempt supplies are excluded from tax liability.
- They only pay 1% (or applicable rate) on taxable turnover.
- While filing CMP-08, composition dealers must report exempt supplies separately under “Outward supplies (including exempt supplies).”
- Even though traders don’t pay tax on exempt sales, they must disclose them for compliance.
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25 November 2025
For Manufacturers (Composition Dealers in Goods)
- Exempt supplies are included in turnover for tax calculation.
- They must pay 1% on the entire turnover (taxable + exempt).
- Example: If a manufacturer sells ₹40 lakh taxable goods and ₹10 lakh exempt goods, tax is payable on ₹50 lakh.
- Exempt supplies are included in turnover for tax calculation.
- They must pay 1% on the entire turnover (taxable + exempt).
- Example: If a manufacturer sells ₹40 lakh taxable goods and ₹10 lakh exempt goods, tax is payable on ₹50 lakh.
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