Option to pay Composite Tax along with application for registration:
Any person who applies for registration may give an option to pay tax under composition scheme in Part B of registration form viz. FORM GST REG-01, which shall be considered an intimation to pay tax under the said Section.
Effective date of Composition Levy:
As per Rule-4 of CGST Rules, 2017, such intimation shall be considered only after the grant of registration to the applicant and his option to pay tax under composition levy shall be effective from the date from which registration is effective.
Filing of intimation before the beginning of Financial Year (Rule 3(3)]:
Any registered person who opts to pay tax under Section 10 shall electronically file an intimation in prescribed form on the common portal prior to the commencement of the financial year for which the option to pay tax under the aforesaid Section is exercised.
Furnishing of ITC declaration within 60 days:
He shall furnish the statement in prescribed form [Form GST ITC-03] in accordance with the provisions of Rule 44(4) within a period of 60 days from the commencement of the relevant financial year.
Details of stock to be furnished within 90 days from the date of option:
Any person who files an intimation shall furnish the details of stock including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts for composition levy. electronically, in prescribed form (Form GST CMP-03) on the common portal within a period of 90 days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.
One intimation applicable for all places in case of same PAN [Rule 3(5)]:
Any intimation in respect of any place of business in any State or Union territory shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.
What are the Conditions and restrictions for composition levy ?
Conditions and restrictions for composition levy [Rule 5]:
The following Conditions which are to be satisfied for Composition Levy
- He is neither a casual taxable person nor a non-resident taxable person;
- The goods held in stock by him have not been purchased from an unregistered supplier and where Purchased, he pays the tax under Section 9(4).
- He shall pay tax under Section 9(3)/(4) (reverse charge) on inward supply of goods or services or both.
- He was not engaged in the manufacture of goods as notified under Section 10(2)(e) ie. ice cream, pan-masala, aerated water and tobacco, during the preceding financial year: 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;
- 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.
No need to file fresh intimation every year [Rule 5(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.
Provisions regarding validity of Composition Levy
Option valid:
The option exercised by a registered person to pay tax under Section-10 shall remain valid so long as he satisfies all the conditions mentioned in the said Section and under these rules.
Mandatory cessation of Composition levy on Violation of Conditions:
The composite taxable person shall be liable to pay tax under normal scheme from the day he ceases to satisfy any of the conditions mentioned in Section 10 or the provisions of this Chapter. He shall issue tax invoice for every taxable supply made thereafter and he shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within 7 days of the occurrence of such event.
Application for Withdrawal from Scheme:
The registered person who intends to withdraw from the composition scheme shall, before the date of such withdrawal, file an application in FORM GST CMP-04, duly signed or verified through EVC electronically on the common portal.
SCN for cessation of option on Violation of Conditions [Rule 6(4)]:
Where the proper officer has reasons to believe that the registered person was not eligible to pay tax under Section 10 or has contravened the provisions of the Act or Rules, he may issue a notice to such person in FORM GST CMP-05 to show cause within 15 days of the receipt of such notice as to why the option to pay tax u/s 10 should not be denied.
Reply to SCN:
The registered person shall reply to the show cause notice issued under Rule 6(4) in FORM GST CMP-06
Final order within 30 days of Receipt of Reply:
The proper officer 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 Section 10 from the date of the option or from the date of the event concerning such as the case may be.
Details of stock to be furnished on opting out of such Scheme:
Every person who has furnished an intimation under Rule 6(2) or filed an application for withdrawal under Rule 6(3) or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under Rule 6(5), may electronically furnish at the common portal, either directly or through a Facilitation Centre notified by the Commissioner, a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in 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 30 days from the date from which the option is withdrawn or from the date of the order passed in FORM GST as the case may be.
He shall be entitled to avail input tax credit in respect of the stock of inputs and inputs contained in semi finished or finished goods held in stock by him and on capital goods held by him on the date of withdrawal.
Withdrawal applies to all units
Any intimation or application for withdrawal under Rule 6(2) or (3) or denial of the option to pay tax under 10 in accordance with Rule 6(5) in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.
Penalty provisions in case of irregular availment of the composition scheme:
If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme, the person would be liable to penalty and the provisions of Section 73 or 74 of the CGST Act shall be applicable for determination of tax and penalty.
