“Little Smiles”, a photography firm, has commenced providing photoshoot services in Delhi from the beginning of current financial year 2023-2024. It…

Section 10(2A) of the CGST Act, 2017 provides the turnover limit of 50lakh in the preceding financial year for becoming eligible for composition levy for services. Little Smiles has started the supply of services in the current financial year (FY), thus, it's aggregate turnover in the preceding FY is Nil. Consequently, in the current FY, Little Smiles is eligible for composition scheme for services. A registered person opting for composition levy for services shall pay tax @ 3% [Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of supplies of goods and services in the State. Further, Little Smiles becomes eligible for the registration when the aggregate turnover exceeds 20lakh (the threshold limit of obtaining registration). While registering under GST, Little Smiles can opt for composition scheme for services. The option of a registered person to avail composition scheme for services shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the threshold limit of 50lakh. However, for the purposes of determining the tax payable under composition scheme, the expression “turnover in State” shall not include the value of supplies from the first day of April of a FY up to the date when such person becomes liable for registration under the CGST Act. Thus, for determining the turnover of the State for payment of tax under composition scheme for services, turnover of April, 2023 – June, 2023 quarter [20lakh] shall be excluded. On next 30lakh [turnover of July, 2023 – September, 2023 quarter], it shall pay tax @ 6% [3% CGST and 3% SGST]. For the purposes of computing aggregate turnover of a registered person for determining his eligibility to pay tax under this section, aggregate turnover includes value of supplies from the 1st April of a FY up to the date of his becoming liable for registration. Thus, while computing aggregate turnover for determining Little Smiles's eligibility to pay tax under composition scheme, value of supplies from the first day of April of a financial year up to the date when it becomes liable for registration under this Act (i.e. turnover of April, 2023 – June, 2023 quarter), are included. By the end of July, 2023 – September, 2023 quarter, the aggregate turnover reaches 50lakh. Consequently, the option to avail composition scheme for services shall lapse by the end of July, 2023 – September, 2023 quarter and thereafter, it is required to pay tax at the normal rate of 18%. Considering the above provisions, the tax payable for each quarter is as under:- S. No. Quarter GST rate [CGST + SGST] Turnover (₹ in lakh) GST payable (₹ in lakh) 1 April, 2023 – June, 2023 - 20 - 2 July, 2023 – September, 2023 6% 30 1.8 3 October, 2023 – December, 2023 18% 40 7.2