Section 10 — Composition levy | CGST Act

☐ Has aggregate turnover been computed (PAN-wide)? ☐ Is turnover within operative threshold (Rs. 1.5 crore for goods / Rs. 50 lakh for services)? ☐ Has supplier category been determined (manufacturer / restaurant / other)? ☐ Has…

Section 10 composition compliance — checklist (19 items)

☐ Has aggregate turnover been computed (PAN-wide)?

☐ Is turnover within operative threshold (Rs. 1.5 crore for goods / Rs. 50 lakh for services)?

☐ Has supplier category been determined (manufacturer / restaurant / other)?

☐ Has applicable rate been verified per Notification?

☐ Has eligibility condition (a) — no service supply (except restaurant) — been verified?

☐ Has eligibility condition (b) — all supplies leviable to tax — been verified?

☐ Has eligibility condition (c) — no inter-State outward — been verified?

☐ Has eligibility condition (d) — no ECO supply with TCS — been verified?

☐ Has eligibility condition (e) — not manufacturer of notified goods — been verified?

☐ Has eligibility condition (f) — not casual / non-resident TP — been verified?

☐ For PAN-multiple registrations, has unity been ensured?

☐ Has breakeven analysis been performed?

☐ Has CMP-02 opt-in been filed?

☐ Has CMP-03 stock declaration been filed?

☐ Is Bill of Supply being issued (not tax invoice)?

☐ Are CMP-08 quarterly statements being filed?

☐ Is GSTR-4 annual return being filed?

☐ Has continuous eligibility-monitoring discipline been maintained?

☐ Has the file been reviewed for audit-defensibility?

Worked examples — five live scenarios

Example 1 — Small trader composition

Facts: Small trader, intra-State only, FY 2024-25 turnover Rs. 80 lakh. No inter-State / no exempt / no ECO. PAN-single registration.

Analysis: Eligible for composition under sub-s. (1)(c) — 0.5% rate (other supplier). Tax = 0.5% × Rs. 80 lakh = Rs. 40,000 + same SGST = total Rs. 80,000 (combined 1%). vs Regular scheme — if blended rate 12% and ITC is, say, 60% effective tax (4.8% net), tax = ~Rs. 3.84 lakh. Composition far cheaper.

Result: Composition optimal. Opt-in via CMP-02.

Example 2 — Inter-State trigger

Facts: Trader on composition. Receives order from out-of-State customer. Plans to supply.

Analysis: Inter-State outward supply triggers sub-s. (2)(c) breach. Composition lapses. Practitioner advice — decline the inter-State order to preserve composition, OR opt out via CMP-04 and transition to regular scheme. If supply made, composition lapses from supply date.

Result: Inter-State supply breaches composition. Composition lapse triggered.

Example 3 — Manufacturer composition

Facts: Small manufacturer, intra-State only, FY 2024-25 turnover Rs. 1.2 crore. No exempt / no inter-State.

Analysis: Sub-s. (1)(a) — manufacturer rate 1% (combined). Tax = 1% × Rs. 1.2 crore = Rs. 1.2 lakh CGST + Rs. 1.2 lakh SGST = Rs. 2.4 lakh combined. vs Regular scheme at 18% with say 50% ITC efficiency — Rs. 10.8 lakh net. Composition much cheaper.

Result: Composition optimal for low-input manufacturer.

Example 4 — Restaurant composition

Facts: Restaurant on composition. Turnover Rs. 60 lakh FY 2024-25. Intra-State.

Analysis: Sub-s. (1)(b) — 2.5% CGST + 2.5% SGST = 5% combined. Tax = 5% × Rs. 60 lakh = Rs. 3 lakh. vs Regular scheme at 5% (restaurant — no ITC option for non-AC); composition and regular yield same tax in restaurant scenario. But composition's compliance simplification valuable.

Result: Composition's compliance benefit even when tax-neutral. Operational simplification valuable.

Example 5 — Service provider sub-s. (2A) composition

Facts: Small service provider, intra-State only, FY 2024-25 turnover Rs. 35 lakh.

Analysis: Eligible for sub-s. (2A) — service-provider composition. Rate 3% combined (CGST 1.5% + SGST 1.5%). Tax = 3% × Rs. 35 lakh = Rs. 1.05 lakh. vs Regular at 18% with no ITC (since service provider with low inputs) = Rs. 6.3 lakh. Composition far cheaper.

Result: Service-provider composition under sub-s. (2A) optimal for very small service business.

Planning and litigation strategy

• Conduct annual breakeven analysis for composition vs regular scheme decision.
• For composition taxpayers, maintain continuous eligibility-monitoring SOPs.
• Train compliance teams on six eligibility conditions in sub-s. (2).
• Coordinate PAN-wide decisions for multi-registration entities.
• For B2B businesses, consider customer ITC-impact in composition decision.
• Track Notification framework for threshold / rate amendments.
• Build documentary trail of eligibility compliance for audit defensibility.
• Apply Dilip Kumar strict-construction framework defensively.
• For service-provider composition under sub-s. (2A), evaluate eligibility separately.
• Maintain CMP-08 quarterly + GSTR-4 annual filing discipline.
• On any eligibility-breach event, immediately consider CMP-04 opt-out.
• Coordinate composition with broader compliance framework.
• Apply Vatika prospective-operation for any framework amendment.
• Build precedent file on composition jurisprudence.
• Maintain readiness for Departmental scrutiny through compliance documentation.

Litigation defence

• For Departmental challenge to composition eligibility, apply Dilip Kumar strict-construction defensively.
• Build documentary trail of continuous eligibility compliance.
• Plead Mafatlal procedural-fairness framework.
• Use Mohit Minerals constitutional framework for threshold / rate Notification validity.
• Apply Vatika prospective-operation for amendment challenges.
• Use Bharti Airtel substance-over-form discipline.
• Use Whirlpool framework for Article 226 writ jurisdiction.
• Plead Calcutta Discount Co. for jurisdictional discipline.
• Use Modern Dental proportionality for any rate / threshold amendment.
• For PAN-multiple-registration challenges, plead proviso framework.
• For sub-s. (2A) service-provider composition challenges, plead FA 2019 framework.
• Build precedent file on composition jurisprudence.
• Coordinate with State / UTGST parallel composition framework.
• Maintain readiness for composition-related litigation.
• For breakeven analysis support, document financial impact carefully.
• Use Maneka Gandhi procedural-fairness for natural-justice anchor.

Cross-references

• Section 2(6) (Aggregate turnover)
• Section 9(1), (3), (4) (Standard levy + RCM framework)
• Section 18(2) (ITC on opt-out from composition)
• Section 25 (Registration)
• Section 31(3)(c) (Bill of Supply)
• Section 39 (Returns)
• Section 52 (TCS by ECO — eligibility bar)
• Schedule II para 6(b) (Restaurant — Schedule II classification)
• Article 246A, Constitution of India (concurrent legislative power)
• Notification 8/2017-CT (notified goods — composition bar)
• Notification 14/2019-CT (operative rates)
• CGST Rules 3-7 (composition framework)
• FORM GST CMP-01, CMP-02, CMP-03, CMP-04
• FORM GST CMP-08 (quarterly statement)
• FORM GSTR-4 (annual return)
• FORM GST REG-01 (registration interface)
• Finance Act 2019 (sub-s. (2A) insertion)
• Dilip Kumar (2018) 9 SCC 1 (strict construction)
• Mohit Minerals (2022) 10 SCC 700 (constitutional architecture)
• Mafatlal Industries (1997) 5 SCC 536 (procedural framework)
• Bharti Airtel v UoI (2021) 11 SCC 374 (substance over form)
• Vatika Township (2014) 367 ITR 466 (prospective operation)
• Whirlpool Corporation (1998) 8 SCC 1 (writ jurisdiction)
• Modern Dental College (2016) 7 SCC 353 (proportionality)
• Calcutta Discount Co. AIR 1961 SC 372 (jurisdictional limits)
• Maneka Gandhi (1978) 1 SCC 248 (procedural fairness)
• Constitutional jurisprudence on concession / exemption discipline
• CESTAT / HC precedents on composition framework
• GST Council Meeting Minutes on composition deliberations
• CBIC Circulars on composition operational guidance

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