Composition Scheme

- Dhwani Mainkar
 Meaning of Retailer
 “Retailers” means the dealers engaged in prescribed business of reselling at retail, any
goods or merchandise. A dealer is deemed to be engaged in the business of retailers if 90%
of his sales are to persons who are not dealers. In simple words scheme is applicable to
retailers or the dealers catering to the ultimate consumers. In case of any dispute, the
matter may be referred to the joint commissioner, whose decision, after hearing the
concerned party shall be final. The scheme is not available to:
   a manufacturer or
   an importer or
   a dealer who effects inter-State sales or purchases or receives goods from outside the
State on stock transfer basis
Classes of Goods excluded from the scheme
and turnover of Sales
 Eligible Turnover
 Following Class of goods excluded from the scheme and Turnover of sales / purchases is
not to be considered for calculation of composition
 a)  Foreign liquor, Country liquor and liquor imported in India
 b)  Drugs covered by Entry C 29
 c)  Notified motor spirits viz. High Speed Diesel, Petrol, Aviation Turbine Fuel and Aviation
Gasoline
Composition amount
 5% for retailers who’s aggregate of the turnover of sales of goods covered by Schedule A
and goods taxable at 5% is more than 50% of the total turnover of sales and 8% in other
cases
 Conditions:
 Dealers covered under the composite scheme cannot collect tax separately
 Such dealers are not entitled to claim set-off in respect of the purchases corresponding to
any goods which are sold or resold or used in packing of goods
 Turnover of the dealer should not o exceed Rs.50 lakhs and in case of new dealers –
Composition applicable for first Rs.50 lakhs only
 Taxable goods resold are purchased from registered dealer
 Restaurants and Caterers
 The composition scheme is available to Restaurants, Eating house, Refreshment rooms,
Boarding establishments, Factory canteen, Clubs, Hotels upto four star and Caterers in respect of
the sales of Food and non-alcoholic drinks:
 -  served for consumption in any restaurant etc or in the immediate vicinity of any restaurant etc
 -  Supplied by way of counter sale
 -  Served for consumption at any other place other than restaurant etc. or by a caterer
 Where the dealer is also serving alcoholic drinks, tax payable on sales of alcoholic drinks will
not be considered for composition. In other case Composition payable at 5 % (10% in the case
of an unregistered dealer) of the turnover of sales
 Other Conditions
 - dealer cannot collect tax separately
- dealer not entitled to claim set-off in respect of the purchases corresponding to any goods
which are sold or resold or used in packing of goods Dealer cannot issue tax invoice
 Bakers:
 Composition scheme applicable to sales by manufacturer of bakery products, who are existing,
registered dealers having turnover of bakery products including bread not to exceed Rs. 50 lakhs
in the previous year. For a newly registered dealers - concession available for first Rs. 50 lakhs of
turnover.
 Rate of composition is 4% (6% in the case of an unregistered dealer) of first thirty lakh rupees of
total turnover of sales of goods including bread in loaf, rolls, or in slices, toasted or otherwise,
whether manufactured by the baker himself or imported in the State.
  Conditions:
The claimant dealer should be certified by the Joint Commissioner
 The claimant dealer not entitle to claim set-off in respect of purchases corresponding to any goods
which are sold or resold or used in packing of goods
 Turnover in excess of first thirty lakhs rupees taxable at the applicable rate
 Such dealer cannot issue tax invoice
 Dealers of Second Hand Motor Vehicles
 The scheme is available to a registered dealer whose principal business is of buying or
selling of second-hand passenger motor vehicles whether or not sold after reconditioning or
refurbishing. Composition rate is 12.5% on 15% of the sale price of the vehicle – effectively
1.88%
 Works Contractors, Builders and Developers
 U/s 42 A dealer involved in the execution of a works contract, may subject to prescribed
restrictions and conditions , pay lump-sum by way of composition,—
 (a) 5% of the total contract value of a construction contract, or
 (b) 8% in any other case,
 After deducting from the total contract value of the works contract, the amount payable
towards sub-contract involving goods to a registered sub-contractor.