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Transition from Composition Scheme To Regular Scheme In GST

Under 50 lakhs - GST Composition Scheme

GST is meant to sort out complications and give a definite structure to the current tax regime. Well, the aim of taking this giant step is sure to do a lot of good but it is essential to be aware of every nitty-gritty of this reform not only from the point of view of a common consumer but every trader, service provider and businessman.

Here’s a quick guide to give you an insight about the changes when a composition dealer switches to become a regular dealer under GST.

Once GST sets in, all the registered dealer under the indirect tax regime would be transitioned to the new tax regime, that is, GST with a provisional registration ID. After the details are submitted, final registration ID would be issued confirming the enrolment. Similarly, the dealers who opted for composition scheme would be transitioned to the same in GST regime.

Under GST, dealers who do not have an aggregate annual turnover exceeding 50 lakhs can opt for GST composition scheme.

However, while switching from being a Composition dealer to the regular one, certain rules need to be adhered to and compliance requirements that of a Regular Dealer need to be followed. One of the most important aspects that needs to be kept in mind is that Input Tax Credit can be availed.

A Composition Dealer becomes a regular dealer by the following ways:

  1. Voluntary opting for Composition Scheme.
  2. By enforcement of law when the aggregate turnover exceeds Rs. 75 lakhs.

Once the dealer becomes a regular dealer, he would be allowed to avail credit held in closing stock of inputs, semi-finished goods and finished goods.

Conditions to Avail ITC In Closing Stock

Based on the following conditions, the input tax credit can be availed.

  1. The closing stock must be intended for the taxable supplies and in the form of raw materials, finished goods or semi finished goods.
  2. The invoice or any other supporting document of tax payment should be available with the dealer.
  3. The tax paid on the closing stock should be permissible also under the old tax structure. This is applicable for claiming VAT credit only.
  4. The date of invoice should be within 12 months from the date of transitioning to GST.

As soon as the aforementioned conditions are met, the dealer can shift from being a composition scheme dealer to the regular one and enjoy the tax credit benefits introduced under the Goods & Service Tax.

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