# Marginal Supply of Services Permitted under 10(1)

## The rule

Manufacturers / traders / restaurant service providers under composition u/s 10(1) & (2) can ALSO supply services (other than restaurant services) up to a marginal cap.

## The cap (whichever is HIGHER)

1. 10% of turnover in State/UT in the preceding FY, OR

2. ₹5 lakh

## Interest exclusion (Explanation to Second Proviso)

Exempt supply of services by way of extending deposits/loans/advances where consideration is interest/discount is excluded while computing the marginal services figure. Applies to BOTH 10(1) and 10(2A) frameworks.

## Why this exists

Many small dealers occasionally render incidental services (e.g., installation, repair, after-sales). The legislature did not want such marginal mixing to throw them out of the goods scheme.

Worked example

### Example 1

Ramsewak — preceding FY turnover in State ₹60 lakh, eligible for goods composition in CY.

10% of ₹60 lakh = ₹6 lakh.
₹5 lakh threshold.
Higher = ₹6 lakh — he may supply services (non-restaurant) up to ₹6 lakh in CY.

### Example 2

Shopkeeper — preceding FY turnover ₹20 lakh.

10% = ₹2 lakh; threshold ₹5 lakh.
Higher = ₹5 lakh — services cap is ₹5 lakh.

### Example 3

Trader with ₹100 lakh PY turnover and ₹3 lakh interest on FD in CY.

Service cap: higher of 10% of ₹100L = ₹10L or ₹5L → ₹10 lakh.
Interest income is excluded from marginal services computation.

⚠️ Common exam mistakes

Adding interest on deposits/loans/advances to the marginal services count — it is excluded.
Including restaurant services in the marginal services cap — restaurant is its own category.
Picking the lower of the two limits — the law says 'whichever is HIGHER'.

Reference: Second proviso to Section 10(1) and Explanation thereto — CGST Act, 2017

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Marginal Supply of Services by Goods-Composition Dealer [Second Proviso to Sec 10(1)]

Worked example

⚠️ Common exam mistakes