py q 2025 question paper bhu lllb 6sem

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Q1. Composition Levy Scheme under the CGST Act, 2017

Introduction

Composition Levy Scheme under the CGST Act, 2017

The Composition Levy Scheme is provided under Section 10 of the Central Goods and Services Tax (CGST) Act, 2017. It is a simplified taxation scheme designed for small taxpayers who find it difficult to maintain detailed accounts and comply with complex GST procedures.

Under the normal GST system, a registered taxpayer must maintain proper records of purchases, sales, input tax credit (ITC), tax invoices, and must file multiple monthly returns. This process can be complicated and expensive for small businesses. Therefore, the government introduced the composition scheme to reduce compliance burden and encourage small businesses to become part of the tax system.

Under this scheme, the taxpayer pays tax at a fixed percentage of turnover instead of normal GST rates and follows simple compliance procedures.

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Objective of Composition Scheme

The main objectives of the composition scheme are:

1. To reduce compliance burden for small businesses.
2. To simplify GST procedures.
3. To reduce the cost of maintaining accounts.
4. To promote ease of doing business.
5. To encourage voluntary tax compliance.
6. To bring small traders into the tax system.

Small businesses often lack professional accountants or tax experts. Therefore, the scheme provides a simple way to pay tax.

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Eligibility Criteria

A taxpayer can opt for the composition scheme if the aggregate turnover in the previous financial year does not exceed the prescribed limit.

Turnover Limit

1. ₹1.5 crore for most states.
2. ₹75 lakh for special category states.
3. ₹50 lakh for service providers under composition scheme.

Aggregate turnover includes:

• Taxable supplies
• Exempt supplies
• Export of goods or services
• Inter-state supplies between branches having same PAN

Aggregate turnover excludes:

• GST taxes
• Value of inward supplies on which reverse charge applies.

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Persons Eligible for Composition Scheme

The following persons can opt:

1. Manufacturer of goods
2. Trader or supplier of goods
3. Restaurant service providers (not serving alcohol)
4. Small service providers

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Tax Rates under Composition Scheme

Type of Business	GST Rate
Manufacturer	1%
Trader	1%
Restaurant services	5%
Service provider	6%

The tax is calculated on total turnover in state or union territory.

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Conditions for Opting Composition Scheme

The taxpayer must satisfy the following conditions:

1. The taxpayer should not supply goods outside the state.
2. Inter-state supply is not allowed.
3. The taxpayer should not supply goods through e-commerce operators.
4. The taxpayer should not manufacture notified goods such as:
   • Ice cream
   • Pan masala
   • Tobacco products
5. The taxpayer cannot collect GST from customers.
6. Input tax credit cannot be claimed.
7. All businesses under same PAN must opt for scheme together.
8. Taxpayer must mention “composition taxable person” on bill.
9. Taxpayer must issue bill of supply instead of tax invoice.

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Restrictions under Composition Scheme

1. Cannot claim input tax credit.
2. Cannot issue tax invoice.
3. Cannot collect GST separately.
4. Cannot supply through e-commerce operators.
5. Cannot make inter-state supply.
6. Cannot supply exempt goods only.

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Advantages of Composition Scheme

1. Simple compliance procedure.
2. Lower tax rates.
3. Less paperwork.
4. Suitable for small businesses.
5. Reduces cost of hiring tax professionals.
6. Encourages small traders to register under GST.

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Disadvantages of Composition Scheme

1. No input tax credit available.
2. Cannot do inter-state business.
3. Cannot supply through e-commerce platforms.
4. Not suitable for exporters.
5. Customers cannot claim ITC.

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Example

Suppose Mr. A runs a small grocery shop with annual turnover of ₹40 lakh.

Under normal GST: He must maintain records and file monthly returns.

Under composition scheme: He pays tax at 1% of turnover.

Tax payable: 1% of 40,00,000 = ₹40,000

Compliance burden becomes very low.

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Case Law

K. Damodarasamy Naidu & Bros vs State of Tamil Nadu

Court held that composition scheme is optional and taxpayer may choose whether to opt or not depending on benefit.

Builders Association of India vs Union of India

Court observed that simplified tax schemes help small taxpayers comply with tax laws.

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Conclusion

Composition scheme is beneficial for small taxpayers who want simple compliance. However, due to restrictions on input tax credit and inter-state supply, businesses must carefully decide whether the scheme is suitable.

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Q2. Types of Registration under CGST Act, 2017

Introduction

GST registration is compulsory for persons engaged in supply of goods or services if turnover exceeds prescribed limit. Registration gives legal recognition to business and allows collection of tax and claim of input tax credit.

Provisions relating to registration are covered under Sections 22 to 30 of CGST Act.

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Threshold Limit for Registration

Category	Limit
Goods	₹40 lakh
Services	₹20 lakh
Special states	₹10 lakh

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Types of Registration

1. Normal Taxpayer

A person whose turnover exceeds threshold limit must register as normal taxpayer.

Example: A shopkeeper having turnover of ₹60 lakh must obtain GST registration.

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2. Composition Taxpayer

Small taxpayers may opt for composition scheme under Section 10.

Example: Small restaurant owner with turnover of ₹30 lakh.

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3. Casual Taxable Person

A person who occasionally supplies goods in state where no fixed place of business.

Example: Person selling handicrafts in exhibition.

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4. Non-Resident Taxable Person

A person living outside India but supplying goods in India.

Example: Foreign company supplying online services.

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5. Input Service Distributor

Office distributing input tax credit to branches.

Example: Head office receiving invoice for advertisement expenses.

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6. E-commerce Operator

Online platform supplying goods or services.

Example: Amazon, Flipkart.

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7. TDS Deductor

Government department deducting tax at source.

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Compulsory Registration

Registration is compulsory for:

1. Inter-state supplier
2. Casual taxable person
3. Non-resident taxable person
4. E-commerce operator
5. Persons liable under reverse charge
6. Input service distributor

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Case Law

State of Kerala vs Fr. William Fernandez

Court held that registration is necessary for proper tax administration.

Commissioner of Central Tax vs Safari Retreats Pvt Ltd

Court emphasized importance of registration for claiming input tax credit.

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Conclusion

GST registration ensures proper tax compliance and allows businesses to claim benefits such as input tax credit.

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Q3. Reverse Charge Mechanism under CGST Act, 2017

Introduction

Reverse Charge Mechanism (RCM) is a system where tax liability is shifted from supplier to recipient.

Normally supplier pays GST, but under reverse charge, recipient pays tax.

Provisions covered under:

• Section 9(3)
• Section 9(4)
• Section 9(5)

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Meaning of Reverse Charge

Reverse charge means recipient is liable to pay GST instead of supplier.

Government notifies goods and services covered under RCM.

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Situations where RCM applies

1. Legal services provided by advocate
2. Goods transport agency services
3. Sponsorship services
4. Director services
5. Import of services
6. Security services
7. E-commerce services

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Difference between Normal Charge and Reverse Charge

Basis	Normal Charge	Reverse Charge
Liability	Supplier	Recipient
Payment	Collected by supplier	Paid by recipient
ITC	Available	Available after payment

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Example

Company hires advocate for legal advice.

Advocate does not charge GST.

Company must pay GST under reverse charge.

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Procedure under RCM

1. Recipient must pay tax in cash.
2. Self invoice must be issued.
3. Payment voucher must be prepared.
4. ITC can be claimed after payment.
5. Details must be shown in return.

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Case Law

Mohit Minerals Pvt Ltd vs Union of India (2022)

Supreme Court held that double taxation under reverse charge is not valid in certain cases relating to ocean freight.

Gujarat High Court in AAP & Co Chartered Accountants case

Court clarified interpretation of reverse charge provisions.

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Advantages

1. Prevents tax evasion.
2. Ensures tax collection.
3. Covers unorganized sector.

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Disadvantages

1. Compliance burden on recipient.
2. Cash flow problem.
3. Additional documentation required.

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Conclusion

Reverse charge mechanism ensures tax collection where supplier is unregistered or located outside taxable territory.

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Q4. Furnishing of Returns under CGST Act, 2017

Introduction

GST return is a document containing details of sales, purchases, tax liability and input tax credit.

Every registered taxpayer must file returns within prescribed time.

Returns provisions mainly covered under Section 39 of CGST Act.

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Importance of GST Returns

1. Ensures tax compliance.
2. Helps government track transactions.
3. Enables claim of input tax credit.
4. Avoids penalties.
5. Maintains transparency.

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Types of GST Returns

GSTR-1

Details of outward supplies.

Filed monthly or quarterly.

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GSTR-3B

Summary return of tax liability.

Filed monthly.

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GSTR-4

Filed by composition taxpayers.

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GSTR-5

Filed by non-resident taxable person.

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GSTR-6

Filed by input service distributor.

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GSTR-7

Filed by TDS deductor.

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GSTR-8

Filed by e-commerce operator.

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GSTR-9

Annual return.

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Time Limit

Returns must be filed within due date prescribed under GST law.

Late filing results in penalty and interest.

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Example

If taxpayer fails to file GSTR-3B on time, late fee is charged per day.

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Case Law

AAP & Co vs Union of India

Court discussed importance of proper filing of returns.

Bharti Airtel Ltd vs Union of India

Supreme Court held that taxpayer must follow prescribed procedure for rectification of GST returns.

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Consequences of Non-Filing

1. Late fee penalty.
2. Interest on tax.
3. Cancellation of registration.
4. Legal action.

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Conclusion

GST return filing is necessary for proper compliance and smooth functioning of taxation system.

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