Can you can pay GST at concessional rate on supply of services

Composition scheme is applicable to supply of goods and to only one service namely, restaurant service. It’s not applicable to any other services. Government has extended the benefit to a certain limit up to a maximum amount of Rs 5,00,000 through section 10(1) read with section 10(2)(a). As per this section a marginal supply of services up to the limit as discussed is allowed along with the supply of goods and/or restaurant services if the registered person is paying tax under composition scheme. However, we do not have this type of concession for those people engaged exclusively in supply of services.

In order to provide benefits to small suppliers of services, the government has notified certain benefits vide notification number 2/2019 CT ( R ) dated 07.03.2019. It’s a scheme to pay GST at a concessional rate applicable to small suppliers of services. In this article we will be discussing provisions related to the concessional rate of GST applicable exclusively to supply of services.

Who can take benefit of concessional rate of GST on supply of services

As per the notification, a registered person whose aggregate turnover in the preceding financial year is up to 50,00,000 rupees and who is not eligible to pay tax under composition scheme can avail the benefit of paying GST at concessional rate.

Which means, the provisions of the notification number 2/2019 CR ( R ) dated 07.03.2019 applicable to a registered person whose aggregate turnover in the preceding financial year does not exceed 50,00,000 rupees and who is exclusively engaged in supplying services other than restaurant services.

All eligible persons are required to pay GST @ 6% (CGST 3% and SGST 3%) on first supply of goods and/or services  up to an aggregate turnover of 50,00,000 rupees made on or after 1st April in any financial year.

Conditions to avail the benefit of concessional rate of GST

  • Supplies are made by a registered person who is not engaged in making any supply which is not leviable to tax under the said act.
  • Registered person is not engaged in making any inter-state outward supply neither of goods nor of services.
  • The registered person is neither a casual taxable person nor a non-resident taxable person.
  • Supplies are made by a registered person who is not engaged in making any supply through an e-commerce operator who is required to collect tax u/s 52.
  • Not engaged in making supplies of notified goods, namely, ice cream and other edible ice, whether or not containing cocoa, pan masala and all goods on chapter 24.
  • Registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

The registered person shall issue a bill of supply instead of tax invoice. The bill of supply will have the words at its top “taxable person paying tax in terms of notification no 2/2019 CT ( R ) dated 07.03.2019, not eligible to collect tax on supplies”.

If the registered person has taken more than one registration under the same PAN then, tax on supplies by all such registered persons is to be paid at the concessional rate as per this notification.

Such a person is liable to pay tax on inward supplies on which he is liable to pay at the applicable rate.

When you avail benefits under this notification, you should pay an amount equal to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods by way of debit in the electronic credit ledger or electronic cash ledger. After such payment, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

The CGST rules,2017 as applicable to a person paying tax under composition scheme shall mutatis mutandis, apply to a person paying tax under this notification.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.