Compulsory Withdrawal From Composition Levy FAQs

Compulsory Withdrawal From Composition Levy FAQs

1. What is meant by Compulsory Withdrawal from Composition Levy?

A taxpayer can opt out of Composition levy in any of the two ways:

1. Voluntarily opt out of Composition levy by filing Form GST CMP-04 on the GST Portal or
2. Compulsorily removed out of Composition levy by the Tax Official at any time during the financial year.

In case, the taxpayer does not opt out of the Composition levy within 7 days of disqualifying event, proceedings for compulsory withdrawal from Composition levy can be initiated by the Tax Official.

2. What are the pre-conditions for Compulsory Withdrawal from Composition Levy?

Listed below are the pre-conditions for Compulsory Withdrawal from Composition Levy:

1. Taxpayer has a valid and active GSTIN.
2. Composition Taxpayer has successfully submitted “Application to Opt for Composition levy” for the subsequent financial year Or Applicant is flagged as Composition taxpayer as on the current date.

3. By when can a taxpayer reply to SCN issued by Tax Official?

On issue of SCN to taxpayer for Compulsory withdrawal from the Composition levy, taxpayer needs to file a reply within 15 days from date of issue of such notice.

4. How can I view the notice and order issued for Compulsory Withdrawal from Composition Levy?

Navigate to Services > User Services > View Notices and Orders option to view the notice and order issued by Tax Official for Compulsory Withdrawal from Composition Levy.

Click here to know more about it.

5. How can I reply to the notice issued by Tax Official for Compulsory Withdrawal from Composition Levy?

Navigate to Services > Registration > Application for Filing Clarifications option to reply to the notice issued by Tax Official for Compulsory Withdrawal from Composition Levy.

Click here to know more about it.

6. Can a Tax Official Compulsory Withdraw a taxpayer from Composition Levy without issuing SCN?

Compulsory withdrawal from Composition levy cannot be initiated without issuing SCN by the Tax Official. Taxpayer will always be given an opportunity of being heard before withdrawal from the Composition levy.

7. What a Tax Official can do in case taxpayer has not replied to SCN issued by Tax Official?

The Tax Official will have 30 calendar days’ time from the date of receipt of clarification from taxpayer on SCN or 15 days if no reply is received from taxpayer on SCN issued, whichever is earlier, to take any of following action on the work item:

• Drop proceedings
• Withdraw Composition levy of the taxpayer.

In case, taxpayer doesn’t submit clarifications within 15 days from date of issue of SCN, Tax Official can only “Withdraw Composition”.

8. Tax Official has initiated Compulsory Withdrawal from Composition Levy. What will happen in case, I have applied for new registration with same PAN?

If any new registration application is filed mapped to the same PAN and is pending for processing with the Tax officer, which is not approved or rejected, the decision of the approval/ rejection of proceeding for Compulsory withdrawal from Composition levy will also apply to the new GSTIN as applicable.

After issue of “Order for Compulsory Withdrawal from Composition levy”, any new Registration (GSTIN) granted over the same PAN (having effective date of Registration earlier than withdrawal date), will be treated as “Composition” till the date of withdrawal of composition and deemed to be flagged as “Normal” from the date of withdrawal of composition.

For example: If the effective date of Registration is 2nd Jan 2019 and withdrawal from composition date is 11th Jan 2019. In such case, the GSTIN will be treated as Composition till 11th Jan 2019 and Normal from 12th Jan 2019.

9. What will happen if a Tax Official Compulsory Withdraw a taxpayer from Composition Levy?

Once a Tax Official Compulsory Withdrawal a taxpayer from Composition Levy:

1. GST Portal will generate an order for compulsory withdrawal from composition levy.
2. Taxpayer as well as all GSTINs mapped to the same PAN will be intimated about compulsory withdrawal via e- mail and SMS.
3. GST Portal will remove the ‘Composition’ flag, against all the GSTINs mapped to the same PAN.
4. Information about compulsory withdrawal will be passed on to the concerned State/Centre Tax Authorities of such GSTINs.

10. What will happen if a Tax Official drops the proceedings for Compulsory Withdrawal of a taxpayer from Composition Levy?

Once a Tax Official drops the proceedings for Compulsory Withdrawal of a taxpayer from Composition Levy:

1. GST Portal will generate an order for dropping of proceedings.
2. Taxpayer will be intimated about dropping of proceedings via e- mail and SMS.
3. Information about dropping the proceedings will be passed on to the concerned State/Centre Tax Authorities of such GSTINs.

11. What are the various statuses for Compulsory Withdrawal of a taxpayer from Composition Levy?

Various statuses for Compulsory Withdrawal of a taxpayer from Composition Levy are:

1. Pending for Clarification: On issuance of SCN and pending reply by taxpayer
2. Pending for Order: On receipt of reply to SCN and pending order by Tax Official
3. Order Issued: On passing of Order for Withdrawal by Tax Official
4. Proceeding Dropped: On passing of Order by Tax Official for dropping of SCN

FAQ – To Opt Composition Scheme (Explained under GST)

FAQ – To Opt Composition Scheme (Explained under GST)

1. How to opt for the Composition Scheme in GST?

You can opt for the Composition Levy under GST if you are a regular taxpayer with an aggregate annual domestic PAN-based turnover as specified from time to time.

However, you cannot opt for the Composition Levy if you are/you make:

– any supply of goods which are not liable to be taxed under this Act

– inter-state outward supplies of goods

– supplies through electronic commerce operators who are required to collect tax under section 52.

– a manufacturer of notified goods

– a casual dealer

– a Non-Resident Foreign Taxpayer

– a person registered as Input Service Distributor (ISD)

– a person registered as TDS Deductor/Tax Collector

2. How do I apply for Composition Scheme if I am already registered as a regular taxpayer?

To opt for the Composition Levy, perform the following steps on the GST portal:

1. Log in to the Taxpayers’ Interface
2. Go to Services > Registration > Application to Opt for Composition Levy
3. Fill the form as per the form specification rules and submit

3. How do I convert from regular to composition scheme in GST?

Any taxpayer who is registered as normal tax payer under GST needs to file an application to opt for Composition Levy in Form GST-CMP-02 at GST Portal prior to the commencement of financial year for which the option to pay tax under the aforesaid section is exercised.

4. When can I opt for the Composition Levy?

In order to avail this scheme, you need to file an online application to Opt for Composition Levy with the tax authorities. Taxpayers who can opt for this scheme can be categorized as below:

1. New Taxpayers: Any person who becomes liable to register under GST Act, after the appointed day, needs to file his option to pay composition amount in the Application for New Registration in Form GST REG-01.

2. Existing Taxpayers: Any taxpayer who is registered as normal tax payer under GST needs to file an application to opt for Composition Levy in Form GST-CMP-02 at GST Portal prior to the commencement of financial year for which the option to pay tax under the aforesaid section is exercised.

5. I am a registered taxpayer availing the composition scheme under GST Portal. Do I need to file fresh application to opt for composition scheme?

For those taxpayers, who are already availing the composition scheme, there is no requirement to file fresh application opting for composition scheme, subject to compliance of relevant conditions/restrictions in this regard.

6. Is it mandatory to file a Stock Intimation? How do I file a Stock Intimation?

Yes, it is mandatory to file a Stock Intimation.

In addition to filing the application to opt for Composition Levy, you would also require to file a Stock Intimation to furnish the details of stock including inward supply of goods from unregistered persons, held by you on the day preceding the date from which you opt to pay the composition amount. You are required to file Stock Intimation details within 30 days of the date from which Composition Levy is sought.

The application to opt for Composition Levy is not subject to approval by the tax authorities. On filing of the application, you are marked as a composition taxpayer in the system and consequential changes are made in the system. However, in case it is found that you were not eligible for the Composition Levy or have not filed Stock Intimation, you would be compulsorily pushed out of the Composition Levy by initiating appropriate proceedings.

Stock Intimation filed by you is not subject to processing by State & Centre Tax Authorities. However, in case it is found out by the tax authorities that the particulars of stock and ITC reversal furnished in the Stock Intimation are incorrect, the tax authorities can initiate appropriate demand proceedings from back office against you.

7. Can I save the Application to Opt for Composition Levy?

Yes, the application can be saved for up to 15 days from the date of initiation after which it will be purged by the system.

Saved applications can be accessed using the My Saved Applications functionality available in the Taxpayers’ Interface.

8. Can I opt for Composition Levy, if I have dealt in services?

Yes, you can opt for Composition Levy, even if you have dealt in services, from FY 2019-20 onwards.

9. I have dealt in services from 1st April 2019 to 31st July 2019 and have filed application to Opt for Composition Levy. My application has been rejected. Why?

If you have filed Form GSTR-1 or Form GSTR-3B for April/ May/ June 2019 against any GSTIN registered on your PAN across India for FY 2019-20, your application to Opt for Composition Levy will be rejected.

10. What are the returns to be filed by a Composition taxpayer?

Composition taxpayer needs to pay tax and furnish a statement, every quarter or part thereof, as the case may be, in FORM GST CMP-08.

And further he has to furnish a return for every financial year or part thereof, as the case may be, in FORM GSTR-4.

NOTE: For current applicable timelines, refer to Important Dates section on https://www.gst.gov.in/