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.