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GST on Exempt and Zero Rate Supplies under Composition Scheme?

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Aravind Kannan

Future CA

85 Points Posted on 13 February 2023

Hello Friends,

Is it necessary to pay tax under GST for sale of exempted or zero-rated goods @ 1% under composition scheme? I deal with all taxable, exempt and zero-rate goods. Kindly clarify.

Some say i need to pay 1 % on exempt and zero rated as well. please clear my confusion.

I feel that is unfair to pay tax on exempt or zero-rated goods under composition scheme, while there is no tax liability for a regular taxpayer for such goods.

Thanks in Advance.

Replies (10)

Quick Summary

Under the GST composition scheme, tax is payable on aggregate turnover which includes taxable as well as exempt supplies. Hence, composition dealers may be liable to pay composition tax even on exempt supplies, though they cannot make inter-state outward supplies or claim ITC.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 13 February 2023

How it is Zero rated supply?. Zero rated supply means export of goods, supply to SEZ Units, etc , under Composition scheme, Export is not allowed, only Import and Supply within state allowed so please clerify.

Aravind Kannan

Future CA

85 Points Posted on 13 February 2023

Yes sorry. Exempted goods. no zero-rated supply.

i am a manufacturer and seller of my products.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 13 February 2023

You have to pay tax on aggregate turnover and As per section 2(6) of the CGST Act. Aggregate turnover include taxable supply as well as exempt supply, etc , so you liable to pay tax on both .

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 13 February 2023

please confirm with others also .

CA Vidyasagar B

Assistant Manager

82 Points Posted on 13 February 2023

First of all can a composition dealer make inter state supplies?

CA Rashmi Gandhi

Chartered Accountant

44487 Points Posted on 13 February 2023

Composition dealer can't make inter state supplies.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 13 February 2023

I think He Can purchase Inter-state, even Import services. but Can not sale Inter-state, just confirm.

CA Vidyasagar B

Assistant Manager

82 Points Posted on 14 February 2023

The notification no 01/2018 CT dated 01-01-2018 states that the ‘other suppliers’ (i.e. traders) would be required to pay only on the taxable supplies of goods @ 1%. However, in terms of section 2(108) of the CGST Act, a taxable supply would include exempt supplies also as there is a levy on the exempted goods as well. Hence the wordings of the notification might not be actually executing the decisions of the Council meet.Therefore composition tax has to be paid even on the exempted supplies/nil rated/zero rated.