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Migration from Composite Tax to Regular Tax

Composition Levy as a scheme under GST has been introduced for the benefit of small and medium sized businesses with aggregate turnover of not more than Rs 50 lakhs during the financial year Compton Tax Levy blog. This again is subject to certain conditions. But, what happens when a Composite taxpayer’s aggregate turnover exceeds Rs 50 lakhs?

When a Composition Dealer’s aggregate turnover exceeds the prescribed threshold limit of Rupees 50 Lakhs, he may not be eligible to opt for composition levy under GST. Such dealer may then either switch over voluntarily to being a Regular Dealer or by enforcement of law migrate to a being a Regular Dealer adhering to the compliance requirements.

As stated under regular scheme of Sec-16 (3), ‘when a taxable person / composite dealer ceases to pay composition tax and becomes liable to pay tax as a regular taxable person, then such dealer is eligible to take input tax credit in respect of inputs held in closing stock (semi-finished and finished goods) as on the day immediately preceding the date from which he becomes liable to pay tax.

What are the eligibility conditions to avail input tax credit held in closing stock?

To avail the input tax credit held in closing stock, the conditions are:-

  • The closings stock held in the form of raw materials / semi finished / finished goods should be used, or intended to be used for taxable supplies only. Any exempted supplies will not eligible for input tax credit eligibility.
  • If the dealer wants to avail credit on the VAT paid on closing stock goods, in such a case, the VAT paid on the goods should be acceptable under the earlier taxation law.
  • All invoices (tax invoice, debit not credit note, supplementary invoice) with respect to any tax levied on closing stock — excise, service vat , etc., should be documented with the dealer.
  • The date of invoices mentioned in the point above, should be within 12 months from the date of migrating to GST as a Regular Tax Payer.
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6 Comments “Migration from Composite Tax to Regular Tax

  • SANDEEP AGARWAL
    September 9, 2017 8:37 pmReply

    I registered under composition scheme but after 2 months I feel that I am losing business because of ITC cannot be claimed.Now I want to migrate to regular gst so what should I do.

  • Dipak Kumar Singh
    September 10, 2017 7:03 amReply

    Please Reply for the process if I intentionally want to migrate from composition scheme to Regular scheme, I don’t want to wait for crossing turnover for regular scheme, I want to change now and immediately, because I can’t do my business with regular dealers, so I want to change from composition scheme to Regular scheme.

    Please Guide Me and Thank you

  • Bharat Jain
    September 17, 2017 6:53 pmReply

    File Form GST CMP 04 and then GST ITC 01 within 30 days of withdrawal… Regards

  • mohana
    September 25, 2017 9:42 pmReply

    hi while creating a new service rc in gst , i had wrongly selected as ISD. now i want to change to regular type and file return for this month. how to rectify that error

  • sreejith k r
    September 30, 2017 3:38 pmReply

    when we select the “intimation to withdrawal of composition scheme” in gst , they ask the submission period . what do they meant by the submission period? i don’t know but i type the date in those field ( from and to)but those are wrong.if you know please send me the answer

  • G M DEVENDRAN
    October 13, 2017 11:55 amReply

    help for composition to regular I WILL ALREADY APPLIED TO GST TWO MONTHS OVER HOWEVER HOW CAN I COMPOSITION TO REGULAR

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