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Calculation of Composition Levy

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Hariom Viradiya

97 Points Posted on 14 May 2020

While calculating Turnover in state for determining composition levy payable to Government, will we exclude 'OUTWARD' supplies chargeable to tax on RCM basis. If 'OUTWARD' supplies chargeable to tax on RCM basis are not excluded while calculating Turnover in state then this would mean that even composite dealer is paying tax on such supplies. Thus government will get tax from composite dealer as well as from Recipient. Please share your thoughts about this

Please note that i need clarity on "OUTWARD" supplies taxable under RCM

Replies (3)

Quick Summary

This discussion explores how to calculate turnover for composition levy, specifically addressing whether to include outward supplies taxable under Reverse Charge Mechanism (RCM). Participants debate if excluding these supplies is necessary to prevent double taxation, as composite dealers paying tax on RCM supplies might lead to the government receiving tax twice. The consensus leans towards excluding inward RCM supplies from aggregate turnover calculation, aligning with the definition in CGST Act, Section 2(6).

Aashok Kumar Sharma

Finance/Compliance Consultant

68127 Points Posted on 14 May 2020

Yes agree. But recipient is also taking input tax credit on the same and it is not a NET Tax to the Government as these RCM Tax paid will be adjusted with Output Liability of the recipient.

Aashok Kumar Sharma

Finance/Compliance Consultant

68127 Points Posted on 14 May 2020

Tax paid by the Composite dealer is the net tax to the government. However the Composite dealer is also paying Tax as Input Tax and they are unable claim the same that seems to be unfair which should be allowed as deduction from Output Tax Payable Annually.

Pankaj Rawat

GST Practitioner

29904 Points Posted on 14 May 2020

Yes for Computing aggregate turnover to determine threshold limit for composition dealer , the Outward supply under RCM is included in aggregate turnover.
Yes it exlude the inward supply on which tax is paid on RCM.

Refer Definition of aggregate Turnover u/s 2(6) of CGST.