Composition Scheme for Service Providers - Section 10(2A)
# Composition Scheme for Services - Section 10(2A) of CGST Act
Section 10(1) and 10(2) primarily target suppliers of goods (and restaurant services). Section 10(2A) was introduced to extend the benefit of a composition-like scheme to service providers and mixed suppliers who fall outside Section 10(1).
## Eligibility - Threshold
A registered person can opt for the scheme under Section 10(2A) only if:
Aggregate turnover in the preceding financial year does NOT exceed Rs. 50 lakh (uniform — no separate special category state limit here).
## Tax Rate
6% of turnover in the State / UT
CGST: 3%
SGST/UTGST: 3%
## Conditions and Salient Features
#
Condition
1
Person opting under 10(2A) CAN supply both goods and services (i.e., mixed supply allowed).
2
No Input Tax Credit (ITC) can be claimed.
3
Cannot collect tax from the recipient (must pay GST out of own pocket; cannot issue tax invoice — only Bill of Supply).
4
Inter-State purchases (inward supply) ALLOWED; but Inter-State outward supplies NOT allowed.
5
The composition tax rate is not applicable in certain RCM/reverse charge cases (RCM is paid at normal rates).
6
On opting for the scheme: ITC reversal must be declared in Form GST ITC-03 within 60 days.
7
On opting out of the scheme: Details of stock held on the date of withdrawal must be furnished.
8
Returns: Annual return in Form GSTR-4 by 30th June of the succeeding FY.
9
Payment: Quarterly via Form CMP-08 by 18th of the month following the quarter (e.g., for Apr-Jun quarter, due by 18th July).
## Same Ineligibility List as 10(2)
Persons barred from 10(1)/10(2) are also barred from 10(2A) — i.e., non-taxable suppliers, inter-State outward suppliers, ECO-TCS suppliers, CTP/NRTP, manufacturers of notified goods.
Worked example
### Example 1
Example 1 - Pure service provider:
Mr. P is a beauty parlour owner in Delhi with PFY turnover of Rs. 35 lakh. He cannot opt under Section 10(1) (since pure services). Can he opt under 10(2A)?
Mr. R (opted under 10(2A)) purchases raw materials from Maharashtra to Karnataka. Can he do so? Can he sell to a Tamil Nadu customer?
Answer:
Inter-State INWARD supply (purchase from Maharashtra) - Allowed.
Inter-State OUTWARD supply (sale to Tamil Nadu) - NOT allowed. He would lose composition eligibility.
⚠️ Common exam mistakes
Assuming 10(2A) is only for service providers - it actually applies to mixed suppliers of goods and services who fall outside 10(1).
Trying to collect 6% GST from the customer - composition dealers cannot collect tax; the 6% comes out of their own margin.
Claiming ITC on inputs - explicitly prohibited.
Confusing inter-State inward (allowed) with inter-State outward (not allowed).
Issuing a Tax Invoice - composition dealers must issue a Bill of Supply with declaration 'Composition taxable person, not eligible to collect tax on supplies'.
Mixing up due dates: GSTR-4 (annual) is by 30th June; CMP-08 (quarterly payment) is by 18th of next month.
Bare-Act text Section 10(2A) · CGST Act, 2017 · click to expand
Section 10(2A): Notwithstanding anything to the contrary contained in this Act, but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, not eligible to opt to pay tax under sub-sections (1) and (2), whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9, an amount of tax calculated at such rate as may be prescribed, but not exceeding three per cent. of the turnover in State or turnover in Union territory, if he is not— (a) engaged in making any supply of goods or services which are not leviable to tax under this Act; (b) engaged in making any inter-State outward supplies of goods or services; (c) engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52; (d) a manufacturer of such goods or supplier of such services as may be notified by the Government on the recommendations of the Council; and (e) a casual taxable person or a non-resident taxable person.