13-05-2014, 12:06 PM
DIRECT AND INDIRECT TAXES
INDIRECT TAXES.pptx (Size: 75.92 KB / Downloads: 12)
What is Composition of Tax [Section 42]
The state government may provide for a scheme of composition of tax payable by dealers.
Composition of tax means payment of an amount in lieu of tax or lumpsum payment of tax.
Composition scheme is optional. It is basically meant for small dealers.
Composition Schemes under the MVAT Act
Composition Scheme of Retailers:- Under Sub-section (1) of Section 42 of MVAT, State Govt. is empowered to issue Notification for Composition Scheme in respect to dealers, who are engaged in the business of reselling at retail.
Composition Scheme for Restaurants:-As per Section 42(2) the State Govt. is empowered to issue Notification for Composition Schemes in respect of :-
Eating house, Restaurants, Caterers, etc.,
Calculation of Taxable Turnover:-
It is an excess of turnover of sales including tax-free goods over the turnover of purchases including tax-free goods.
In the first year of operation, dealer can claim the deduction under section 3(2) of MVAT Act, 2002 and only balance turnover shall be taken for calculation purposes.
Rate of Composition:-
The Composition amount is payable at the rate of 5% on the excess turnover of sales, in case of retailers, whose aggregate turnover of sales of goods covered by Schedule A and goods taxable at the rate of 4% is more than 50% of the total sales and in any other case, the Composition amount is payable at the rate of 8%.