COMPOSITION LEVY:
It is a special provision for taxable persons with aggregate turnover below fifty lakh rupees. They would not be part of the credit chain and would not be able to pass on the tax to consumers. The tax levied on them would be a certain percentage (not less than one percent) of the turnover during the year. The proper officer of the Central or a StateGovernment may permit a registered taxable person to avail this special facility. The provisions in detail in this respect have been laid out in Section 8 of the Model CGST/SGST Act. There is a caveat in this that this would not be available for those effecting inter-state supply. Section 8 has been cited as below.
Section 8 :
(1) Notwithstanding anything to the contrary contained in the Act but subject to sub-section (3) of section 7, on the recommendation of the Council, the proper officer of the Central or a State Government may, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in a financial year does not exceed [fifty lakh of rupees], to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than one percent of the turnover during the year:
Provided that no such permission shall be granted to a taxable person who effects any inter-State supplies of goods and/or services.
Provided further that no such permission shall be granted to a taxable person unless all the registered taxable persons, having the same PAN as held by the said taxable person, also opt to pay tax under the provisions of this sub-section.
(2) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
(3) If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under sub-section (1), such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty equivalent to the amount of tax payable as aforesaid:
Provided that no penalty shall be imposed without giving a notice to show cause and without affording a reasonable opportunity of being heard to the person proceeded against.
Besides these special provisions exemptions can also be made for certain category of taxable persons or even goods or services from being taxed. The provisions in relation to these are explained in the next section.