GST
B2B buyers cannot claim ITC from composition dealers
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Facts
Buyers cannot claim ITC on purchases from a composition dealer, because no GST is charged on a bill of supply. Registered business buyers may prefer suppliers in the regular scheme.
Provisions and law
- Sec 10(4), CGST Act 2017A composition taxpayer cannot collect tax from customers and cannot take ITC
- Sec 16(2), CGST Act 2017ITC requires a tax invoice showing tax charged
Analysis
Example: a packaging maker sells Rs 1 crore a year to factories. As a regular supplier he charges 18 percent and the factories claim it back. As a composition supplier, the factory gets no credit, so the effective cost to them rises. Many such buyers will shift orders. Composition fits best when most customers are consumers.
Conclusion
- List your top customers and whether they are registered
- Ask key B2B buyers if they need tax invoices
- Estimate business at risk if you choose composition
- Stay regular if most sales are B2B
A Savvy can do this for you
Opting into composition, CMP-02
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