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.
Applicability: Composition scheme is applicable to the following category of dealers:
1. Retailer
2. Notified dealers
3. Dealers running any eating-house, restaurant, hotel, refreshment room or boarding
establishment or caterers serving food and non-alchoholic drinks
4. Works contractor
5. Dealers running bakeries
6. Dealers of second-hand motor vehicles, whose principal business is buying or selling
motor vehicles

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Exclusion: Following dealers cannot opt for composition scheme :
a. Manufacturer
b. Importer
c. A dealer who purchases goods from a registered dealer and effects sales that are not
liable to tax. (i.e. interstate sale or export sale etc).
d. Seller of liquor (including foreign liquor, Indian made foreign liquor or country liquor)

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