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CA Intermediate · Taxation · Charge of GST

Verma & Co., a registered person in Delhi, supplies taxable goods worth Rs 5,00,000 (exclusive of tax) to Rao Stores, a registered dealer in Delhi, at 18% GST. Verma & Co. has opted for the composition levy under section 10 instead. Which statement about its position is correct?

A composition taxpayer cannot collect tax from the buyer and must issue a bill of supply rather than a tax invoice. It pays tax at the composition rate out of its own funds, and the buyer cannot claim input tax credit.

  1. AIt cannot collect tax from Rao Stores and pays tax at the composition rate from its own pocketCorrect
  2. BIt must charge 18% GST and issue a tax invoice
  3. CIt may collect composition tax separately on the invoice
  4. DIt may issue a tax invoice and let Rao Stores claim ITC

Explanation

A composition taxpayer pays tax at a prescribed percentage of turnover but cannot collect tax from the recipient and issues a bill of supply, not a tax invoice. The buyer gets no ITC.

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