Reduced Composition Levy Rate – From 1% to 0.5%

Notification No.: 01/2018 – Central Tax
Date of Notification: 1st January 2018
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 10(1): Composition Levy
• Amends: Notification No. 8/2017 – Central Tax dated 27th June 2017
• Last Amended By: Notification No. 46/2017 – Central Tax dated 13th October 2017
• Integrated GST Act: Not applicable

Summary of Notification

The Central Government, on recommendation of the GST Council, made further amendments to Notification No. 8/2017 – Central Tax, which prescribes tax rates for registered persons under the Composition Scheme.

1. Reduction of Tax Rate for Manufacturers:
   In clause (i) of the original notification, the applicable tax rate was reduced from 1% to 0.5% (i.e., half per cent) of the turnover in the State or Union territory for manufacturers (other than manufacturers of notified goods).
2. Clarification on Tax Base for Traders (Clause iii):
   In clause (iii), the tax rate of 0.5% is now to be applied on the turnover of taxable supplies of goods, instead of the entire turnover. This amendment ensures that only taxable supplies of goods are included in the tax base, excluding exempt and non-taxable supplies.

These changes provide tax relief and clarify the scope of tax computation for small businesses under the Composition Levy.

Source: Notification No.: 01/2018 – Central Tax