Services Provided by a Composition Dealer under GST

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Udaya Chandran (Querist)
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23 October 2024 As per the second proviso to the Section 10 of the CGST Act, a composition dealer can supply services of the value not exceeding 10% of the turnover in a State in the preceding financial year.

Hence, a manufacturer who is a composition dealer can supply services, 10% of the turnover of the preceding year and pay GST @ 1% both for the supply of goods and services.

Example: Turnover in the preceding financial year is Rs.70 Lakhs, then the manufacturer can supply services for a value of Rs.7 Lakhs and pay GST @ 1% i.e. Rs.7000 along with supply of goods.

Please confirm if my understanding is correct.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2024 According to Section 10 of the Central Goods and Services Tax (CGST) Act, 2017, a composition dealer is allowed to supply services, but with certain limitations. The second proviso to Section 10 states that:
"...a composition dealer shall be allowed to supply services, of value not exceeding ten percent. of the turnover in a State or Union territory in the preceding financial year, or five lakh rupees, whichever is higher."

Udaya Chandran

Udaya Chandran (Querist)
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23 October 2024 @Dhirajlal Rambhia
Sir, Thanks for the reply.

10% of the turnover (i.e.Rs.7 Lakhs) or Rs.5 Lakhs, whichever is higher - Rs.7 Lakhs is the higher value. In that case, supplier can provide services up to Rs.7 Lakhs - Am I correct?

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2024 The clause is NOT affirmative... But Negative..... (Value not exceeding...)
“Provided further that a person who opts to pay tax under clause (a) or clause (b) or clause (c) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten per cent. of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.""
It means any thing less than 5 lakhs value.....
But anything more than Rs. 5 lakhs supply...... 10% .... limit.

In another words if supply of services exceeds Rs. 5 lakhs, or 10 % of the total value (whichever higher), he is not eligible for the composition scheme.

Udaya Chandran

Udaya Chandran (Querist)
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24 October 2024 Sir, I humbly disagree with you in this regard. If the turnover is Rs.1.50 Crores in the preceding financial year, then the composition dealer can supply services up to the value of Rs.15 Lakhs (10% of Rs.1.50 Crores) which is higher than Rs.5 lakhs.

I'm looking forward to others' comments/suggestions/ideas on this matter.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 October 2024 Yes, I ratify the above statement, as per the conditions he will be able to supply services upto 7 lakhs.
Thanks .......

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