How to compute the tax payable under the composition scheme?


For computing the tax payable in the composition scheme, we need to understand the calculation of Turnover in state of the Manufacturer, restaurant/ outdoor catering services, etc. and supplier of services opting composition scheme under sec 10(2A) and calculation of Turnover of taxable supplies of goods and services in the state in case of Traders respectively:

Category Tax Computation
Manufacturer 1% *{All taxable supplies + wholly exempt supplies+ nil rate supplies} in a state
Restaurant, catering, mess, or any other service contract where goods as food or drink are supplied for human consumption 5% *{All taxable supplies + wholly exempt supplies+ nil rate supplies} in a state
Traders 1% *{All taxable supplies} in a state
Suppliers of Services who are ineligible under Sec 10(1) but eligible under Section 10(2A) 6% *{All taxable supplies + wholly exempt supplies+ nil rate supplies} in a state

Can a Composition taxable person take the credit of tax paid by him on his inward supplies?

The Composition taxable person has to forego the Input tax credit on the inward supplies made by him as this is one of the primary conditions or restrictions for Composition taxpayers.

How to compute aggregate turnover for determining eligibility for composition scheme?

The aggregate turnover means the aggregate value of:

  • All the taxable supplies
  • Exempt supplies (wholly exempt, NIL rate, and non-taxable supplies)
  • Export of goods or services or both
  • Interstate supplies of persons having the same PAN to be computed on all India basis (Branch transfer/ stock transfer) to be calculated on all India PAN basis

But excludes

  • CGST, SGST/UTGST, IGST
  • Value of inward supplies on which tax is payable by a person on a reverse charge basis