CGST Act 2017 Section 10

The Central Goods and Services Tax Act, 2017 introduced a comprehensive indirect tax system in India. Section 10 of this Act specifically deals with the composition levy scheme, which offers a simplified tax compliance mechanism for small taxpayers. Understanding this section is crucial for businesses looking to benefit from reduced compliance burdens under GST.

The CGST Act's Section 10 outlines eligibility, conditions, and procedures for opting into the composition scheme. Taxpayers, professionals, and GST officers must grasp these provisions to ensure proper tax treatment, avoid penalties, and streamline GST compliance effectively.

Central Goods and Services Tax Act, 2017 Section 10 – Exact Provision

Section 10 of the CGST Act allows eligible taxpayers to pay tax at a fixed rate on their turnover instead of the regular GST rates. This scheme simplifies tax calculation and filing, reducing compliance costs for small businesses. The scheme is optional and subject to prescribed conditions and restrictions, including turnover limits and ineligibility criteria.

• Applicable to small taxpayers with turnover below prescribed limits.

• Tax paid at fixed rates on turnover, not on each supply.

• Certain businesses are excluded from the scheme.

• Option to opt-in or opt-out annually.

• Compliance with conditions is mandatory to maintain scheme benefits.

Explanation of CGST Act Section 10

Section 10 permits certain small taxpayers to pay GST under a composition scheme at a fixed rate. This reduces the compliance burden compared to regular GST.

• States that eligible persons can opt for composition levy.

• Applies to registered persons with turnover below the threshold.

• Includes manufacturers, traders, and restaurants (excluding alcohol).

• Excludes service providers except specified categories.

• Triggers on opting in at the start of the financial year or during the year.

• Allows simplified tax payment and filing.

• Restricts input tax credit claims by composition taxpayers.

Purpose and Rationale of CGST Act Section 10

The composition scheme under Section 10 aims to ease GST compliance for small businesses by reducing tax rates and simplifying procedures.

• Ensures uniform indirect taxation for small taxpayers.

• Prevents tax evasion by simplifying tax payment.

• Streamlines compliance with fewer returns and simpler calculations.

• Promotes input tax credit flow indirectly by excluding composition taxpayers from claiming ITC.

• Supports steady revenue collection from small taxpayers.

When CGST Act Section 10 Applies

This section applies when a taxpayer meets eligibility criteria and opts for the composition scheme under GST.

• Supply of goods or specified services within a State or Union territory.

• Turnover below prescribed limits (currently Rs. 1.5 crore, with exceptions).

• At the beginning of the financial year or during the year with approval.

• Excludes inter-state supplies and certain excluded businesses.

• Applies only to registered persons opting for composition levy.

Tax Treatment and Legal Effect under CGST Act Section 10

Under Section 10, tax is levied at a fixed rate on turnover instead of the standard GST rates. Composition taxpayers cannot claim input tax credit, and their tax liability is simplified.

The scheme affects GST liability computation by replacing multiple tax rates with a single rate. It interacts with other provisions by restricting ITC claims and limiting supply types.

• Tax paid on turnover at prescribed fixed rates.

• No input tax credit allowed for composition taxpayers.

• Tax liability is simpler to calculate and report.

Nature of Obligation or Benefit under CGST Act Section 10

Section 10 creates a conditional benefit by allowing eligible taxpayers to opt for a simplified tax regime with reduced compliance.

The obligation to comply with scheme conditions is mandatory once opted. Benefits include lower tax rates and simpler filings, but ITC claims are disallowed.

• Creates optional tax liability under composition scheme.

• Compliance obligation to maintain scheme eligibility.

• Benefit of reduced tax rates and simplified returns.

• Mandatory to pay tax at fixed rates if opted in.

• Disallows input tax credit claims.

Stage of GST Process Where Section Applies

Section 10 primarily applies at the supply and compliance stages of GST.

• At the supply stage, composition taxpayers charge tax at fixed rates.

• Invoicing must mention composition scheme status.

• Return filing is simplified with quarterly returns.

• Tax payment is at fixed rates on turnover.

• Assessment and audit focus on scheme compliance.

• Appeal or recovery may arise from non-compliance.

Penalties, Interest, or Consequences under CGST Act Section 10

Non-compliance with Section 10 conditions can lead to penalties, interest, and loss of scheme benefits.

Interest is charged on delayed tax payments. Penalties apply for incorrect filings or misuse of the scheme. Prosecution may occur in severe cases.

• Interest on late tax payments.

• Penalties for non-compliance or incorrect returns.

• Cancellation of composition registration for violations.

• Loss of scheme benefits and reversion to regular GST.

Example of CGST Act Section 10 in Practical Use

Supplier X is a small manufacturer with an annual turnover of Rs. 1 crore. He opts for the composition scheme under Section 10 to pay tax at 1% on turnover instead of regular GST rates. This reduces his compliance burden and tax liability. Supplier X files quarterly returns and does not claim input tax credit. During an audit, the officer verifies his turnover and compliance with scheme conditions.

• Small taxpayers benefit from simplified tax rates and returns.

• Compliance with scheme conditions is essential to retain benefits.

Historical Background of CGST Act Section 10

GST was introduced in India in 2017 to unify indirect taxes. Section 10 was designed to ease compliance for small taxpayers through the composition scheme.

• Introduced with GST rollout in 2017.

• Originally set turnover limits and tax rates for composition levy.

• Amended periodically by GST Council to adjust thresholds and expand eligibility.

Modern Relevance of CGST Act Section 10

In 2026, Section 10 remains vital for small businesses adapting to digital GST compliance, including e-invoicing and e-way bills.

• Supports digital compliance with simplified returns.

• Policy relevance in promoting ease of doing business.

• Practical usage by small taxpayers to reduce tax burden.

Related Sections

• CGST Act, 2017 Section 7 – Scope of supply.

• CGST Act, 2017 Section 9 – Levy and collection of tax.

• CGST Act, 2017 Section 16 – Eligibility for input tax credit.

• CGST Act, 2017 Section 31 – Tax invoice.

• CGST Act, 2017 Section 39 – Furnishing of returns.

• CGST Act, 2017 Section 73 – Demand for non-fraud cases.

Case References under CGST Act Section 10

No landmark case directly interprets this section as of 2026.

Key Facts Summary for CGST Act Section 10

• Section: 10

• Title: Composition Levy

• Category: Levy, Compliance, Taxation

• Applies To: Small taxpayers with turnover below prescribed limits

• Tax Impact: Fixed rate tax on turnover, no ITC allowed

• Compliance Requirement: Quarterly returns, scheme conditions

• Related Forms/Returns: CMP-08 (composition scheme return)

Conclusion on CGST Act Section 10

Section 10 of the CGST Act, 2017 provides a crucial option for small taxpayers to pay GST under a simplified composition scheme. This reduces their tax burden and compliance complexity, fostering ease of doing business. However, strict adherence to conditions is necessary to maintain eligibility and avoid penalties.

The composition levy supports the government’s goal of broadening the tax base while easing compliance for small businesses. Understanding this section helps taxpayers make informed decisions and ensures smooth GST operations.

FAQs on CGST Act Section 10

Who can opt for the composition scheme under Section 10?

Registered persons with aggregate turnover below the prescribed limit, mainly small manufacturers, traders, and certain service providers, can opt for the composition scheme.

What is the tax rate under the composition scheme?

The tax rate varies by category but is a fixed percentage of turnover, generally lower than regular GST rates, simplifying tax calculation.

Can composition taxpayers claim input tax credit?

No, taxpayers under the composition scheme are not allowed to claim input tax credit on their purchases.

How often must composition taxpayers file returns?

Composition taxpayers file quarterly returns using Form CMP-08, which is simpler than regular monthly returns.

What happens if a composition taxpayer exceeds the turnover limit?

If turnover exceeds the prescribed limit, the taxpayer must switch to regular GST registration and comply with standard tax rates and procedures.