QUESTION

THERE IS ONE QUERY REGARDING COMPOSITION SCHEME UNDER GST.1. WHAT SHOULD SUPPLIER DO IF FAILS TO WITHDRAWAL OF SCHEME OF COMPOSITION LEVY AFTER CROSSING THE LIMITS DEFINE UNDER THIS COMPOSITION SCHEME FOR LAST FINANCIAL YEAR

ANSWER

Facts of the case:
Supplier fails to withdraw from Composition scheme after crossing the limits of turnover as defined under Composition scheme for last FY.

Law Applicable:

CGST RULE 6                                 

 (1) 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.

 (2) The person referred

to in sub-rule (1) shall be liable to pay tax under sub-section (1) of section 9 from the day he ceases to satisfy any of the conditions mentioned in section 10 or the provisions of this Chapter and 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 seven days of the occurrence of such event.

 (3) 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 electronic verification code, electronically on the common portal.

 (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 provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under section 10 shall not be denied.

FAQ: Composition levy

Q 31. What are the penal consequences if a person opts for the composition scheme in violation of the conditions'

Ans.  If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme then the person would be liable to penalty and the provisions of section 73 or 74 shall be applicable for determination of tax and penalty.

Interpretation:
If turnover limit prescribed for Composition scheme exceeds then the supplier is required to file intimation for withdrawal from Composition scheme in FORM GST CMP-04 within seven days from the day on which the threshold limit has been crossed. Supplier is required to take normal registration and pay tax along with interest and penalty as the case may be as per the provisions of section 73 or 74.

 Also supplier is required to issue Fresh invoice so that the recipient will be able to take ITC. Further issue credit note against Bill of supply and apply for refund of tax paid under composition scheme.

 Conclusion:
1. File intimation of withdrawal from composition scheme and take normal registration and pay tax under Section 9 along with interest as per the provisions of section 73.

2. Issue fresh invoice to recipient and raise credit notes against bill of supply issued during composition scheme for period starting from the date the threshold limit for Composition exceeds.

3. Take refund of tax paid under Composition scheme.