GST
Small service income alongside a composition goods business
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Facts
A composition taxpayer in goods can also supply services, other than restaurant service, up to 10 percent of the previous year's turnover or Rs 5 lakh, whichever is higher. Above that, composition is not available.
Provisions and law
- Sec 10(1), proviso, CGST Act 2017Composition taxpayers may supply services up to 10 percent of turnover or Rs 5 lakh, whichever is higher
- Rule 7, CGST Rules 2017Composition rates: 1 percent for manufacturers and traders, 5 percent for restaurant service
Analysis
Example: a mobile shop with Rs 90 lakh goods sales can earn repair income up to Rs 9 lakh (10 percent) and stay in composition. If repair income becomes Rs 15 lakh, the limit is crossed. Track service income separately. Composition tax applies to this service income too at the composition rate.
Conclusion
- Separate goods and service income in your books
- Compute the limit: higher of 10 percent of last year's turnover or Rs 5 lakh
- Keep service income within the limit
- Consider the regular scheme if service income grows
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Opting into composition, CMP-02
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