Opting for GST Composition

A person availing a transition from being a regular taxable person under VAT to paying tax in GST under the Composition scheme has to fulfill the following criteria:

  1. He should not be a casual taxable person, or a non-resident taxable person.
  2. The goods held by him in stock on the appointed day should not have 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.
  3. The goods held in stock by him should not have been purchased from an unregistered supplier and where purchased, he pays the tax under sub section 4 of section 9 (i.e. under Reverse Charge).
  4. He shall pay tax under sub-section 3 or sub-section 4 of section 9 on inward supply of goods or services or both (i.e. under Reverse Charge).
  5. He should not have been engaged in the manufacture of goods as notified under clause (e) of sub-section 2 of section 10, during the preceding financial year.
  6. He will have to mention the words “composition taxable person, not eligible to collect tax on supplies” at the upper of the bill of supply issued by him
  7. He will also have to 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.

Intimation to opt under Composition Scheme:

  1. Any registered person who has been granted provisional certificate shall fill form GST CMP-01 to opt under Composition levy (section 10).
  2. Any person who was not registered in any law and is applying fresh registration under GST shall declare to opt for composition scheme in Part B of Form GST REG-01.
  3. The person opting for composition scheme shall also file Form GST CMP-02 and Form GST ITC-03 within 60 days from the commencement of relevant Financial Year.
  4. The person opting under composition scheme shall file Form GST COMP-03 within 60 days from the day composition scheme is opted, furnish the details of stock including received from unregistered dealer.
  5. All the places of business under same PAN shall be under composition scheme.

Validity of Composition Scheme under GST:

  1. The option exercised by a registered dealer to pay tax under Composition Scheme shall remain valid so long as he satisfies all the conditions mentioned above.
  2. If he ceases to satisfy any of the conditions mentioned above, he will be taxed as a regular dealer under GST, and will be liable to pay tax according to that criterion. He will have to issue tax invoice for every taxable supply made thereafter and shall have to also file an intimation for withdrawal from the Composition scheme in FORM GST COMP-04 within 7 days.
  3. The registered person who intends to withdraw from the composition scheme shall, before the date of the withdrawal, file an application in FORM GST CMP-04, duly signed or verified through electronic verification code, electronically on the common portal.
  4. Where the proper office has reasons to believe that the registered dealer was not eligible to pay tax under the Composition Scheme or has contravened its provisions, he may issue a notice to the dealer in FORM GST CMP-05. The person will be liable to show cause within 15 days of the receipt of such notice as to why the option to pay tax under Composition Scheme shall not be denied.
  5. The registered person shall reply in FORM GST CMP-06, then the proper official shall issue an order in FORM GST CMP-07 within a period of 30 days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under the Composition Scheme from the date of the option or from the date of the event concerning such violations, as the case may be.
  6. Every dealer who has filed for withdrawal from Composition Scheme, or furnished an intimation for withdrawal from the Scheme or a person in respect of whom an order of withdrawal of option has been passed, may electronically furnish at the common portal, a statement in FORM GST ITC-01 containing details of the stock of inputs, and inputs of semi-finished or finished goods held in stock by him on the date on which the option is withdrawn or denied, within a period of only 30 days from the date on which the option is withdrawn or in the other case, in which the order is passed under FORM GST CMP-07.

 

FORM TO BE FILLED FOR
FORM GST COMP-04 Withdrawal from composition Scheme on not meeting the criteria
FORM GST CMP-05 Notice by Officials if dealer is not liable to avail the provisions of Composition Scheme, or has contravened them.
FORM GST CMP-06 Reply to the show Cause notice by the concerned person
FORM GST CMP-07 Issued by proper official either accepting the reply, or denying the option to pay tax under the Composition Scheme
FORM GST ITC-01 After various above forms have been filed, he has to furnish details of the stock of inputs, and inputs of semi-finished or finished goods held in stock by him.

 



Author: CA Parul Gupta
Parul Gupta qualified the CA Exams from the Institute of Chartered Accountants of India. She has dealt with many Startups, companies, partnership and proprietorship firms relating to formation and compliance services.

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