Date of Withdrawal of composition scheme

By | January 21, 2019
(Last Updated On: January 21, 2019)

Date of Withdrawal of composition scheme कम्पोजीशन स्कीम से निकलने की तारीख




Effective Date of denial of composition option of GST by tax authorities

Refe

Refer Circular No 77/50/2018 GST Dated 31st December 2018 Dated 31.12.2018

Sub-rule (2) of rule 6 of the CGST Rules provides that the composition taxpayer shall pay tax under sub-section (1) of section 9 of the CGST Act as a normal taxpayer from the day he ceases to satisfy any of the conditions of the composition scheme and shall issue tax invoice for every taxable supply made thereafter

  1. Effective Date where the composition taxpayer has exercised such option to withdraw from Composition Schme
  2. Effective Date when the composition option is denied to the taxpayer retrospectively by Tax Authorities

Effective Date from which withdrawal from the composition scheme shall take effect in a case where the composition taxpayer has exercised such option to withdraw :-

Sub-rule (3) of rule 6 of the CGST Rules provides that 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 on the common portal.

He shall file intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event.

It is clarified that in a case where the taxpayer has sought withdrawal from the composition scheme, the effective date shall be the date indicated by him in his intimation/application filed in FORM GST CMP-04 but such date may not be prior to the commencement of the financial year in which such intimation/application for withdrawal is being filed.

 If at any stage it is found that he has contravened any of the provisions of the CGST Act or the CGST Rules, action may be initiated for recovery of tax, interest and penalty.

Effective Date when the composition option is denied to the taxpayer retrospectively by Tax Authorities :-

As per sub-rule (4) of rule 6 of the CGST Rules, where the proper officer has reasons to believe that the registered person was not eligible to pay tax under section 10 of the CGST Act or has contravened the provisions of the CGST Act or the CGST Rules, he may issue a notice to such person in FORM GST CMP-05 to show cause as to why the option to pay tax under section 10 of the CGST Act shall not be denied.

Upon receipt of the reply to the show cause notice from the registered person in FORM GST CMP-06, the proper officer shall, in accordance with the provisions of sub-rule (5) of rule 6 of the CGST Rules, issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under section 10 of the CGST Act from the date of the option or from the date of the event concerning such contravention, as the case may be.

In case of denial of option by the tax authorities, the effective date of such denial shall be from a date, including any retrospective date as may be determined by tax authorities, but shall not be prior to the date of contravention of the provisions of the CGST Act or the CGST Rules

[ For Example Date of Opting Composition Scheme : 01.04.2018

Date of Contravention of Compostion Schme provisions from 01.10.2018

Effective date of withdrawal can be from 01.10.2018 only and not from 01.04.2018  ]

 In such cases, as provided under sub-section (5) of section 10 of the CGST Act, the proceedings would have to be initiated under the provisions of section 73 or section 74 of the CGST Act for determination of tax, interest and penalty for the period starting from the date of contravention of provisions till the date of issue of order in FORM GST CMP-07.

 It is also clarified that the registered person shall be liable to pay tax under section 9 of the CGST Act from the date of issue of the order in FORM GST CMP-07.

Provisions of section 18(1)(c) of the CGST Act shall apply for claiming credit on inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the date immediately preceding the date of issue of the order.

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About CA Satbir Singh

Chartered Accountant having 12+ years of Experience in Taxation , Finance and GST related matters and can be reached at Email : Taxheal@gmail.com

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