Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part I]
Composition Scheme
This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.
Vivek Laddha, Manish Gupta, Pooja Patwari
FAQ 1. What is the background of proposed amendment in composition scheme?
Law Brothers’ View: At present, a person is not eligible to opt for the composition levy if he is engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52.
Now with the proposal, the ineligibility to opt for the composition levy is restricted to the case he is engaged in making any supply of services through an electronic commerce operator who is required to collect tax at source under section 52.-
FAQ 2. Whether allowing the composition registered person to supply goods through ECO is applicable to 6% composition scheme [i.e. sec 10(2A)] which is primarily meant for the service provider?
Law Brothers’ View: Yes. Person opted to pay 6% in composition scheme is also permitted to supply goods and not only the services. It may be noted that amendment is just not introduced in section 10(2)[i.e. 1%] but amendment also opens the window to supply the goods through ECO in section 10(2A) [6%].
FAQ 3. With this proposal, can a composition registered person supply the goods through ECO throughout the India?
Law Brothers’ View: No. Person engaged in making any inter-State outward supplies is still not eligible to opt the composition levy. So he will be eligible to make intra- state supply only. In case where he makes interstate supply(directly or through ECO), he will be in the main stream by virtue of law and accordingly the other provisions of normal scheme shall come into the effect. Further, he will be entitled to get the benefit of section 18(1) of CGST Act.
FAQ 4. Where is the control required for E- Commerce Operator (ECO) in such a scenario?
Law Brothers’ View: ECO will have to put the control in place to disallow the person registered in composition scheme to deal in interstate supply to avoid the proposed penalty provision mentioned u/s 122(1B)(ii) of CGST Act. As per proposed section 122(1B)(ii), ECO shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under section 10, whichever is higher.