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CMA Intermediate · Direct and Indirect Taxation · Composition Levy

Mohan Traders, a registered dealer, opted for the composition levy. Under the conditions in the CGST Rules, 2017, which statement about the bill it issues to customers is correct?

A composition taxpayer must issue a bill of supply with the words "composition taxable person, not eligible to collect tax on supplies" at the top. It cannot collect tax from customers, so a tax invoice is not allowed, and the signboard wording is a separate requirement.

  1. AIt must issue a tax invoice and collect tax from customers at the composition rate
  2. BIt must issue a bill of supply carrying the words "composition taxable person, not eligible to collect tax on supplies" at the topCorrect
  3. CIt may issue either a tax invoice or a bill of supply, as it chooses
  4. DIt need not mention any words on the bill if the signboard shows "composition taxable person"

Explanation

Rule 5(1)(f) requires the words "composition taxable person, not eligible to collect tax on supplies" at the top of the bill of supply. A composition person cannot collect tax, so a tax invoice is wrong. The signboard requirement in clause (g) is separate and does not replace the bill wording.

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