What does rule 5 regulate?

It regulates conditions and restrictions for composition levy. Read the exact text, conditions, exceptions and transaction date together.

Which subordinate law should be checked?

No direct CGST Rule has been certified in this phase. Notifications, circulars, forms and the corresponding SGST/UTGST layer may also apply.

What evidence should be retained?

Preserve the contract or transaction record, invoice or form, portal acknowledgement, payment/ledger evidence, correspondence, legal working and the official source version used.

Can portal behaviour override the statute?

No. Portal functionality is operational evidence; legal entitlement and liability remain controlled by the Act, Rules, notifications and binding decisions.

Rule 5 - Conditions and restrictions for composition levy

CGST Rules, 2017

ACTIVEDIRECT_OFFICIAL_RULE_PAGEindex,follow

Source control: The text/status on this page is tied to the official source gateway and the Phase 1 legal-review register. Open official source.

Finin2min Summary - Rule in 2 Minutes

Paragraph / test Plain-language meaning Clause (a) Casual and non-resident taxable persons cannot use the scheme. Clauses (b) and (c) Migration stock conditions tied to Rule 3(1); do not turn them into a generic annual stock test. Clause (d) Composition does not eliminate reverse-charge liability where a current notification/statutory provision applies. Clause (e) Manufacturers of notified excluded goods are ineligible. Clauses (f) and (g) Invoice and premises disclosures are mandatory operational controls. Sub-rule (2) No annual re-intimation is needed while the taxpayer remains eligible. Operational map Control Result Forms / documents Bill of supply, Premises notice/signboard

Exact operative text

(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:- (a) he is neither a casual taxable person nor a non-resident taxable person; (b) the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 3; (c) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section (4) of section 9; (d) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both; (e) he was not engaged in the manufacture of goods as notified under clause (e) of sub-section (2) of section 10, during the preceding financial year; (f) he shall mention the words "composition taxable person, not eligible to collect tax on supplies" at the top of the bill of supply issued by him; and (g) he shall mention the words "composition taxable person" on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business. (2) The registered person paying tax under section 10 may not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and these rules.

Paragraph-wise decode

Section-Rule-Form-Notification bridge

No direct Rule certified in Phase 1. Check notifications, circulars, forms and corresponding State law.

The mapping is a legal concordance, not a round-robin related-link list. It is limited to instruments certified in this phase.

Practical example

RCM does not arise merely because the supplier is unregistered. Rule 5(d) must be read with the current notified scope of section 9(4).

Professional alert

• Section 9(4) is not a universal reverse charge on every purchase from an unregistered supplier; apply only the current notified scope. • Rule 5 does not replace the broader eligibility conditions in section 10, including turnover, outward-supply and PAN-wide requirements.

Finin2min | P0-R01 Finin2min.com | Finance & Law Explained in 2 Minutes | Educational and professional reference • A bill of supply must be used; a composition taxpayer cannot collect tax from the customer.

Implementation checklist

Fix the transaction, taxable period and jurisdiction.
Read every subsection, proviso, explanation and omission marker.
Open the mapped Rule, form, notification and circular.
Test State/UT variation and portal version.
Preserve evidence, approvals, working papers and acknowledgements.
Record the conclusion, assumptions, source date and reviewer.

Evidence and retention checklist

Contract, purchase order, invoice or underlying transaction document.
Registration, return, ledger, challan and portal acknowledgement.
Official Act/Rule/notification version used and effective date.
Internal tax position paper, computation and management approval.
Correspondence, notices, replies, orders and appeal papers where applicable.

Practical Q&A

What does rule 5 regulate?: It regulates conditions and restrictions for composition levy. Read the exact text, conditions, exceptions and transaction date together.
Which subordinate law should be checked?: No direct CGST Rule has been certified in this phase. Notifications, circulars, forms and the corresponding SGST/UTGST layer may also apply.
What evidence should be retained?: Preserve the contract or transaction record, invoice or form, portal acknowledgement, payment/ledger evidence, correspondence, legal working and the official source version used.
Can portal behaviour override the statute?: No. Portal functionality is operational evidence; legal entitlement and liability remain controlled by the Act, Rules, notifications and binding decisions.

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