fbpx
Reverse Charge Under GST
July 13, 2018
ITC for Capital Goods under GST
July 23, 2018

" How To Migrate If Registered As Composition Dealer/ Supplier/ Seller? "

 

What is Composition Scheme?

Composition Scheme is a simple scheme under GST for taxpayers whose turnover is less than Rs. 1.5 crore (less than 75 lakhs for North Eastern states). This scheme helps the small taxpayers to get rid of tedious GST formalities and pay GST at a fixed rate of turnover. The Businesses or dealers registered under this scheme are called compounding dealers or vendors and they are required to file fewer returns as compared to normal taxpayer. Turnover of all businesses registered with the same PAN should be considered to calculate turnover.

 Who can opt for Composition Scheme?

Following can opt for Composition Scheme –

1.     The person should be registered under GST.

2.     Aggregate turnover of the taxpayer must be less than ₹1.5 crore. For north- eastern states, it must be less than ₹75 lakhs.

3.     Only Suppliers of goods, Dealers, and Restaurants (not serving alcohol) can opt for composition scheme.

Migration from Composition Scheme to Regular Scheme under GST

A person registered under Composition scheme can switch to regular scheme in case of the following two situations:

·         When his/her turnover crosses₹50 lakhs (in special category states except Uttrakhand) and ₹75 lakhs (in rest of India).

·         When he voluntarily chooses to become a regular dealer even though his turnover does not cross the threshold limit.

However, while switching from being a Composition dealer to the regular one, certain rules need to be adhered to and compliance requirements that of a Regular Dealer need to be followed.

Let us understand the process to be followed by a person to switch from the composition to regular scheme.

1.     File an Intimation in Form GST CMP-04

A composition tax payer who wants to become a regular tax payer should file an intimation for withdrawal from the composition scheme inForm GST CMP-04. If he is switching from the composition scheme because his turnover crosses the threshold limit, then Form GST CMP-04 should be furnished within 7 days after becoming liable to register as a regular dealer.

It should be noted that an intimation for withdrawal from the composition scheme will be considered as withdrawal from all the places of business registered under the same PAN.

2.     Furnish stock statement in Form GST ITC-01

The person switching to the regular scheme has to furnish a statement in Form GST ITC-01. This form contains details of the stock of inputs, inputs in semi-finished or finished goods held on the day before the date on which he becomes liable to be a regular dealer. Furnishing this form enables the dealer to claim Input Tax Credit on inputs, inputs in semi-finished or finished goods and capital goods in stock when he/she becomes a regular supplier and it has to be furnished within 30 days after filing Form GST CMP-04.

Following are the conditions which must be fulfilled by the taxpayer to avail Input Tax Credit at the time of switching from composition scheme to the regular scheme:

·         Such inputs or goods are intended to be used for making taxable supplies under GST Law.

·         The taxpayer has legal evidence of input tax paid on such goods.

·         Such goods are eligible for input tax credit under GST regime.

·         Taxpayer was eligible for CENVAT Credit on such goods under the previous regime, however, couldn’t claim it being under composition scheme.

·         Such invoices and/ or documents were issued within a period of 12 months from GST applicable date.

For example: ABC Company is registered as a composition dealer in Tamil Nadu. Its turnover crosses ₹75 lakhs on 15th July, ‘18. ABC Company has the following inputs in stock as on 14th July, ’18:

 

Type of Input

 

 

Value of inputs purchased @ 5% GST

 

GST Paid @ 5%

 

Value of inputs purchased @ 18% GST

 

GST Paid @ 18%

 

Raw materials

 

₹1,00,000

₹5,000

₹20,000

₹3,600

 

Inputs in semi-finished goods

 

₹40,000

₹2,000

₹40,000

₹7,200

 

Inputs in finished goods

 

₹2,00,000

₹10,000

₹1,00,000

₹18,000

 

Total input tax paid

 

17,000

28,800

ABC Company must furnish these details in Form GST ITC-01 to be able to avail full ITC of GST paid on inputs of ₹45,800 (GST Paid @ 5% of ₹17,000 + GST paid @ 18% of ₹28,800) on closing stock.

Hence, it is mandatory for the person to withdraw from the composition scheme and become a regular dealer when his turnover crosses the threshold limit of ₹75 lakhs or ₹50 lakhs (in special category states except Uttrakhand). And in order to claim ITC on their closing stock, they must furnish Form GST ITC-01 within 30 days after filing Form GST CMP-04.