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CMA Intermediate · Direct and Indirect Taxation · Composition Levy

Under the composition rules, which statement about a registered person paying tax under section 10 is correct?

The composition person must write the words 'composition taxable person, not eligible to collect tax on supplies' at the top of the bill of supply. He cannot collect tax, need not file yearly intimations, and must pay tax on purchases from unregistered suppliers.

  1. AHe may collect composition tax from customers on a tax invoice
  2. BHe must mention 'composition taxable person, not eligible to collect tax on supplies' at the top of the bill of supplyCorrect
  3. CHe must file a fresh intimation every year to continue the option
  4. DHe may purchase goods from unregistered suppliers without paying any tax

Explanation

The conditions require the words 'composition taxable person, not eligible to collect tax on supplies' at the top of the bill of supply. He cannot collect tax and issues a bill of supply, not a tax invoice. No fresh yearly intimation is required. Where goods are bought from unregistered suppliers, he must pay tax under sub-section (4) of section 9.

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