REGULAR TO COMPOSITION, SWITCH FROM REGULAR TO COMPOSITION SCHEME

COMPOSITION SCHEME IS BASICALLY DESIGNED FOR SMALL TAXPYERS.

A REGISTERED PERSON HAVING ANNUAL TURNOVER UPTO RUPEES 1.5 CRORES CAN OPT FOR COMPOSITION SCHEME.

THIS SCHEME IS SIMPLE AND HASSLE-FREE. IT DOES NOT REQUIRE MAINTENANCE OF ELABORATED ACCOUNTS AND RECORDS.

TAXPAYER HAS TO PAY A FIXED PERCENTAGE (%) OF TAX I.E. GST OF HIS TURNOVER. RETURN FILING IS ASLO VERY SIMPLE AND REQUIRED TO BE FILED QUARTERLY.

IF WE TALK ABOUT DRAWBACKS OF THIS SCHEME; ONLY DRWABACK IS THAT YOU CANNOT MAKE INTER-STATE SALES (BUT PURCHSES FROM ANOTHER STATE IS ALLOWED).

SINCE, IT IS VERY SIMPLE AND FREE OF TEDIOUS COMPLIANCES, SMALL TAXPAYERS OPT THIS SCHEME FOR TAX-SAVING, TIME-SAVING AND TESNSION-FREE BUSINESS PURPOSES.

A PEROSN APPLYING FOR NEW REGISTRATION OF GST CAN OPT-IN (CHOOSE) COMPOSITION SCHEME AT ANY TIME DURING THE YEAR [I.E. WHILE APPLYING FOR NEW REGISTRATION] AND ALSO CAN OPT-OUT FROM COMPOSTION SCHEME AT ANY TIME DURING THE YEAR.

BUT, FOR THOSE “WHO ARE ALREADY REGISTERED IN GST UNDER REGULAR SCHEME” AND WILLING TO OPT-IN COMPOSITION SCHEME – SWITCHING IS NOT POSSIBLE AS PER YOUR MOOD.

OPTION FOR SWITCHING FROM REGULAR TO COMPOSITION SCHEME IS NOT AVAILABLE ON GST PORTAL THROUGHOUT THE YEAR. THIS OPTION IS PROVIDED ON GST PORTAL AT THE END OF EVERY FINANCIAL YEAR DURING FEBRUARY & MARCH WHICH LAPSES ON 31ST MARCH.

A REGISTERED PERSON WHO OPTS FOR COMPOSITION SCHEME DURING THE MONTH OF FEB & MAR [I.E. THE PERIOD WHEN SWITCH-IN OPTION IS AVAILABLE) IS CONSIDERED AS COMPOSITION TAXPAYER FROM THE BEGINNING OF THE NEXT FINANCIAL YEAR.

EX.- IF YOU WISH TO SWITCH FROM REGULAR TO COMPOSITION SCHEME FOR FY 2023-24, YOU HAVE TO FILE AN APPLICATION IN FORM GST CMP-02 “FROM THE DATE OF AVAILABILITY OF OPTION ON THE GST PORTAL TILL 31-03-2023”. AND YOU WILL BE CONSIDERED AS COMPOSITION TAXPAYER FROM 01-04-2023.

NOW, THE MOST IMPORTANT POINT TO BE REMEMBERED IS THAT – SWITCHING FROM REGULAR TO COMPOSITION REQUIRES “REVERSAL OF ITC” INTIMATING THE DETAILS OF CLOSING STOCK, LYING AS ON 31ST MARCH [BECAUSE A COMPOSITION PERSON CANNOT AVAIL THE ITC].

TAXPAYER HAS TO CALCULATE ITC ON CLOSING STOCK AND REVERSE IT BY FILING FORM GST ITC-03 WITHIN 60 DAYS FROM THE DATE OF COMMENCEMENT OF THE RELEVANT FINANCIAL YEAR [I.E. BETWEEN 1ST APRIL TO 30TH MAY].

CALCULATION OF ITC TO BE REVERSED :

REGULAR SCHEME DURING FY 2022-23
Goods Purchased during FY 2022-23 :
Taxable Amount     1,00,000.00
GST @ 5% (ITC)           5,000.00
Total     1,05,000.00
Goods Sold during FY 2022-23 :
Taxable Amount of Purchase         90,000.00
Profit @ 10%           9,000.00
Taxable Amount of Sales         99,000.00
GST @ 5% (Liability)           4,950.00
Total     1,03,950.00
Stock as on 31-03-2023 (1,00,000 – 90,000)         10,000.00
ITC as on 31-03-2023 (5,000 – 4,950)                 50.00

NOW YOU OPT-IN COMPOSITION SCHEME FOR FY 2023-24.

COMPOSITION SCHEME DURING FY 2023-24
Status as on 31-03-2022 i.e. 01/04/2022
Stock as on 31-03-2022 (1,00,000-90,000)           10,000.00
ITC as on 31-03-2022 (5,000-4,950)                    50.00
Need to reverse ITC since Composition taxpayers don’t get benefit of ITC.
To reverse ITC, need to file ITC-03 within 60 days from the beginning of the FY.
ITC @ 5% on stock available = (10,000*5%)                 500.00
Less : Set-off of ITC available in Credit Ledger                    50.00
Balance amount to be paid in cash                 450.00

 

About Taxshastra

Tax Shastra is a knowledge-sharing platform for Individuals, Businesses & Professionals, solely managed and guided by Ratan Sarraf, where you can learn your taxes and finance easily.

View all posts by Taxshastra →

Leave a Reply

Your email address will not be published. Required fields are marked *