M/s XYZ Ltd is a toy manufacturing company; his aggregate turnover in the preceding financial year 2016-17 is Rs. 38 lakh.  Following is the detail of one of the  individual transaction of sale in the month September 2017:- 

Input purchased (excluding tax) in the month: Rs.1 lakh

Input tax paid: Rs.24000

    Profit margin: 10% of cost

CGST rate = 12% and SGST Rate = 12%


(a)                Determine whether M/s XYZ is eligible for composition scheme and if they take registration in composition, determine sale price of above transaction and tax liability under GST.

(b)               If XYZ is also engaged in inter- state outward supply of goods. Determine whether M/s XYZ eligible for composition scheme.



(a)                M/s XYZ  aggregate turnover in preceding year is below Rs. 1 cr rupees and he is also not engaged in inter-state outward supply of goods. Thus, as per provision of Section 10 he is eligible for composition scheme thus may opt for this scheme.


If registration is taken as composition levy then manufacturer is liable to pay tax @ of  1 % of the turnover. Input credit is not allowable under this Scheme even when tax is not chargeable on sale.


 Calculation of tax liability for the month of September

   Particulars   Amount (Rs) 
(i)  Purchase Cost                         100,000.00
(ii)  Taxes paid                            24,000.00
(iii)  Total purchase cost                          124,000.00
(iv)  Profit margin @10%                            12,400.00
(v)  Tax under GST                                            -  
(vi)  Customer Price                          1,36,400.00
(vii)  Tax payble in  respect of this month @ 1%                              1,364.00
   (The registered person under this scheme is required to furnish tax return on quarterly basis by 18th of the month succeeeding the quarter  

(b)              section 10(2) specifies that supplier engaged in making inter-state outward supplies of goods is not eligible for composition levy.


Thus tax liability for the month of September would be as follows;


   Particulars   Amount (Rs) 
(i)  Purchase Cost                         100,000.00
(ii)  Total purchase cost                          100,000.00
(iii)  Profit margin @10%                            10,000.00
(iv)  total                          110,000.00
(v)  Tax under GST (CGST +SGST)@ 24%                            26,400.00
(vi)  Customer Price                          136,400.00
(vii)  Tax payble                             26,400.00
Less:  Input tax credit                            24,000.00
   tax to be paid                              2,400.00

Note: As per Press release dt. 10.11.2017 the Annual Turnover Eligibility for opting the composition scheme will be extented to 1.5 cr.However the same has not been implemented as no notification has been issued by the govt yet.