Composition levy u/s 10 and new presumptive scheme

The "Composition Scheme" under Section 10 of the CGST Act and the scheme under Notification No. 02/2019-Central Tax (Rate) are both simplified tax payment methods for small taxpayers, but they cater to different types of businesses and have distinct eligibility criteria.

Key Differences at a Glance

Detailed Comparison

1. Composition Scheme (Section 10 of CGST Act)

• Purpose: Designed for manufacturers, traders, and restaurant service providers to simplify compliance.

• Turnover Limit: Applicable to taxpayers with an annual aggregate turnover of up to ₹1.5 Crores in the preceding financial year. In certain special category states, this limit is lower (₹75 Lakhs).

• Restrictions: Cannot make inter-state outward supplies, cannot collect tax from customers, and cannot claim Input Tax Credit (ITC).

• Compliance: Quarterly return filing (GSTR-4) and payment of tax on a quarterly basis.

2. Scheme under Notification No. 02/2019-Central Tax (Rate)

• Purpose: Introduced specifically to provide a composition-like benefit to service providers (who were generally excluded from the main Section 10 scheme at the time).

• Turnover Limit: Applicable to service providers whose aggregate turnover in the preceding financial year was ₹50 Lakhs or below.

• Rate: The tax rate is 6% (3% CGST + 3% SGST).

• Exclusion: A person can only opt for this scheme if they are not eligible to pay tax under Section 10(1) of the CGST Act.

• Operating Rules: While this is a notification-based scheme, the operational rules (like filing FORM GST CMP-02 or issuing a "Bill of Supply" instead of a tax invoice) generally mirror the procedures used by regular composition dealers.

Summary

The Section 10 Composition Scheme is the primary statutory scheme for goods-focused businesses and restaurants, while Notification 02/2019 acts as a supplementary "composition-like" scheme for service providers who do not meet the criteria for or are excluded from Section 10.