Problems on Composition levy:

1. Sisodia Limited is a manufacturing concern in Gujarat. In Financial Year 2017-18 total

value of supplies including inward supplies taxed under reverse charge basis are
Rs.1,54,50,000(exclusive of taxes). The break up of supplies are as follows: -

Particulars Rs.
1. Intra State supplies made under forward charge 46,00,000
2. Intra state supplies made which are chargeable to GST at Nil rate 18,00,000
3. Intra state supplies which are wholly exempt u/s.11 of CGST Act, 86,00,000
2017
4. Value of inward supplies on which tax payable under RCM 4,50,000
Briefly explain whether Sisodia Limited is eligible to opt for Composition scheme in
Financial Year 2018-19.

Ans: Computation of taxable turnover Sisodia Limited for the Financial Year 2017-18

Sl. Particulars Rs.

NO
1. Intra State supplies made under forward charge 46,00,000
2. Intra state supplies made which are chargeable to GST at Nil rate 18,00,000
3. Intra state supplies which are wholly exempt u/s.11 of CGST Act, 86,00,000
2017
Total turnover 1,50,00,000
(Ans. Yes, since total turnover of the previous year does not exceed Rs.1.5 crore, it can
opt for composition in the financial year 2018-19, supplies under RCM cannot be
considered).
2. Computation of composition tax liability:
XYZ Ltd a manufacturing concern in Kerala has opted for composition scheme furnishes you
with the following information for Financial year 2018-19. It requires you to determine it’s
composition tax liability and total tax liability. In Financial year 2017-18 total value of supplies
including inward supplies taxed under reverse charge basis are Rs.80 lakhs. The break up of
supplies are as follows: -

Particulars Rs.
1. Intra state Supplies of Goods X chargeable @10% GST 36,00,000
2. Intra state supplies made which are chargeable to GST at Nil rate 22,00,000
3. Intra state supplies which are wholly exempt u/s.11 of CGST Act, 4,50,000
2017
4. Value of inward supplies on which tax payable under RCM (GST 6,00,000
Rate 5%)
5. Intra state supplies of Goods Y chargeable @ 18% GST 24,00,000

Sol. Computation of total tax liability of XYZ Ltd for the year ended 31.3.2019

Sl. No Particulars Rs. Amount(Rs.)

1. Intra state Supplies of Goods X chargeable 36,00,000
@10% GST
2. Intra state supplies made which are chargeable 22,00,000
to GST at Nil rate
3. Intra state supplies which are wholly exempt 4,50,000
u/s.11 of CGST Act, 2017
4. Intra state supplies of Goods Y chargeable @
18% GST 24,00,000
5. Turnover for composite tax 86,50,000
6. Composite tax(86,50,000 x 2%) 1,73,000
7. Value of inward supplies on which tax payable
under RCM (GST Rate 5%)
6,00,000
Tax under reverse charge(Rs.6,00,000 x 5%)
30,0000
Total tax liability 2,03,000

(Ans. Total tax liability is Rs.2,03,000 ie., composite tax, 2% on Rs.86,50,000 + reverse charge ,5%
on Rs.6,00,000)
3. Option for composition scheme: XYZ Ltd., a manufacturing concern had effected intra-state
taxable supply of Rs.18,00,000 and interstate taxable supply of Rs.35,00,000 in Financial Year
2017-18. The company wants to opt for composition scheme u/s. 10 of CGST Act, 2017. As a
GST consultant advice XYZ Ltd whether it can opt for composition scheme.

Ans.

As per the provisions of Sec. 10 of CGST Act, 2017, a manufacturer can opt for composition
scheme if he is not engaged in making any inter-state outward supplies of goods. In this case
since XYZ Ltd has effected interstate taxable supply of goods, hence it cannot opt for
composition scheme.

4. Application of composition scheme: XYZ Ltd is having two factories. One factory is located in
Kerala is manufacturing readymade garments and another factory located in Gujarat is
engaged in manufacture of auto components. The turnover details of Financial Year 2017-18
are as under:

Particulars Rs.
1. Intra Supply of readymade garments in Kerala 32,00,000
2. Intra state supply of auto components in Gujarat 25,00,000
Total value of taxable supplies 57,00,000
The company want to opt for composition scheme for factory in Kerala and tax at normal rates
in Gujarat. Advise.

Ans. According to Sec. 10(2) of CGST Act, 2017, all registered person having same PAN have to
opt for composition scheme. If one opts for regular levy for one registered place, others become
ineligible for composition levy. Thus XYZ Ltd cannot opt for composition scheme in Kerala and
pay normal tax in Gujarat.

5. A person availing composition scheme in Haryana during a financial year crosses the turnover
of Rs.1.50 crore during the course of the year ie.,, he crosses the turnover of Rs.1.50 crore in
December. Will he be allowed to pay tax under composition scheme for the remaining of the
year. Ie., till 31st March?

Ans. No. The option to pay tax under composition scheme lapses from the day on which the
aggregate turnover of the person availing composition scheme during the financial year exceeds
the specified limit (Rs.1.50 crores). He is required to file an intimation for withdrawal from the
scheme in prescribed form within 7 days from the day on which the threshold limit has been
crossed.
 6. A hotel owner provided accommodation in Haryana, through an electronic commerce operator
– Cool Trips. The hotel owner is not liable to get registered as per the provisions of Sec.22(1) of
CGST Act, 2017. Who is the person liable to pay GST in this case? Would your answer be
different if the Electronic Commerce Operator Cool Trips does not have a physical presence in
India?

Ans. Government may notify (on the recommendations of the GST Council) specific categories of
services the tax on intra-State supplies of which services are supplied through it. Services by way
of providing accommodation in hotels through electronic commerce operator is a specified
service for said purpose.

Thus, person liable to pay GST in this case is the Electronic Commerce Operator Cool Trips. All
the provisions of the GST law shall apply to such e-commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such services.

Cool Trips does not have a physical presence in India, person liable to pay tax is the person
representing the Electronic Commerce Operator – Cool Trips for any purpose in India.

7. Determine whether the supplier in the following cases are eligible for composition levy
provided their turnover in preceding year does not exceed Rs.1.50 crore:

(i) Mohan is engaged in providing legal services in Rajasthan and is registered in the same
State.

(ii) Sugam manufacturers has registered offices in Punjab and Haryana and supplies goods
in neighbouring States.

Ans.

(i) A supplier of services engaged in the supplies other than the supplies referred to
in clause (b) of paragraph 6 of Schedule II of CGST Act ie., supply by way of or as
part of any service or in any other manner whatsoever, of goods, being food or
any other articles for human consumption or any drink, is not eligible for
composition levy. Since Mohan provides legal services, he is not eligible for
composition scheme.

(ii) Since supplier of inter-state outward supplies of goods is not eligible for
composition levy, Sugam Manufacturers is not eligible for composition levy.

Problems on Reverse Charge:

1. State person liable to pay GST in the following independent cases with reasons.

(a) Bhaswanth & Co, a leading firm of advocates in Delhi provided legal services to Omkumar
Ltd of Jammu & Kashmir.

(b) Will your answer for (a) change in the following cases:

(i) If Baswanth & Co is a firm of Chartered Accountants.

(ii) If the recipient is Omkumar, an individual (who is not a business entity) of Jammu
& Kashmir.

Ans. A) where the services provided or agreed to be provided by an advocate

including a senior advocate or a firm of advocates, by the way of representational
services before any court or tribunal directly or indirectly to any business entity
located in taxable territory, GST on such services has to be paid on reverse charge
basis.

b) situations: (i) Yes, the answer will change because services provided by a firm of
Chartered Accountants to a business entity is not covered under Reverse Charge.
Therefore, Baswanth & Co is liable to pay GST.

(ii) Yes, The answer will change because representational services provided by an
advocate or firm of advocates to an individual is not covered under reverse charge.
Therefore, Baswanth & Co is liable to pay GST.

2. State person liable to pay GST in the following independent cases with reasons.

a) Guna, an insurance agent provided services to Goodwill Insurance Company Ltd, an

insurance company.

b) Transportation of goods by State Government to Hardhik Ltd.

c) A. R. Rahman, a music composer permitting to use his music compositions by Music Track
Ltd, a music company.

d) sponsorship services provided by AGR Ltd to Seshan, an athlete.

Ans.: a) services provided by an insurance agent to person carrying on insurance business,

located in taxable territory is covered under reverse charge. Therefore, goodwill insurance
company is liable to pay GST.

b) services of transportation of goods or services, provided by Central Government/State

Government/Local Authority to any business entity is specifically excluded from reverse
charge. Therefore, State Government is liable to pay GST.

c)services provided by a music composer to a music company is covered under reverse

charge. Therefore, the Music Track Ltd (music company) is liable to pay GST.

d) Sponsorship services provided by any person to a body corporate or a firm is covered

under reverse charge. In the given case, sponsorship services provided by AGR Ltd to
Seshan (an individual) and is not covered by reverse charge. Therefore, AGR ltd is liable to
pay GST.