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Intimation for withdrawal from composition tax

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Required Documents

Copy of GST Registration Certificate

DSC of authorized person (in case of companies)

Details of stock on the date of withdrawal

There are various drawbacks associated with composition levy which prompts taxpayers to come out of the scheme:

  • Non availability of input tax credit
  • Prohibition on transfer of input tax credit to customer
  • Restriction on making inter-state supplies

To overcome these drawbacks, GSTN has introduced Form GST CMP-04 for withdrawal from composition levy.

 

A taxpayer can withdraw from the composition levy at any time during the financial year for any of the following reasons:-

  • Voluntary Withdrawal
  • Withdrawal due to crossing threshold turnover limit of Rs. 1.5 crores/75 Lakhs/ 50 Lakhs
  • Supplying restaurant services other than as specified under clause (b) of para-6 of Schedule-II of CGST Act
  • Supply of goods not liable to tax- goods & services earlier taxable now becoming exempt
  • Initiating supply of goods through e-commerce operator
  • Starting inter-state supplies

The registered taxpayer who intends to withdraw from the composition scheme is required to file intimation for withdrawal in Form GST CMP-04 within 7 days of the occurrence of any of the above event.

Required Documents

Copy of GST Registration Certificate

DSC of authorized person (in case of companies)

Details of stock on the date of withdrawal

Step by Step Procedure of Intimation for withdrawal from composition tax

STEP 1

Login to GST Portal and enter User Id and password associated with your GST

STEP 2

Select “Application for withdrawal from Composition Levy” under Services>Registration Tab;

STEP 3

Select the date from which withdrawal from composition levy is sought. The date for withdrawal from composition levy cannot be before the date on which composition levy has been opted

STEP 4

Select the reason for withdrawal from composition levy from the drop-down list

STEP 5

Select Authorized signatory and save the filled form and sign application using DSC/EVC

STEP 6

On successful filing, System will generate ARN. Application is auto approved and GST portal will also send a confirmation message on registered mobile and email id

STEP 7

Then File FORM GST ITC-01 containing details of stock of inputs and the inputs contained in semi finished goods & finished goods held in stock on the date on which the option is withdrawn- within 30 days from withdrawal of composition levy

Frequently Asked Question

When do I need to file application for withdrawal from composition levy?

The application to withdraw from the composition levy is to be filed within 7 days from the date when taxpayer fails to satisfy any condition of Section 10 of CGST Act or a taxpayer may also voluntarily opt out of the composition scheme by filing an application within 7 days of opting out.

Which form is to be filed to withdraw from composition levy?

GST CMP-04 is to be filed for withdrawal from composition levy.

Do a sanction or approval of tax authority is required to withdraw from the composition levy?

No approval from any state or central tax authorities is needed to withdraw from composition levy. As soon as GST CMP-04 is filed, it is auto approved immediately.

How the application for withdrawal from the composition levy is authenticated?

The application in Form GST CMP-04 can be signed using DSC or authenticating using EVC.

Where a person has more than one GSTIN associated with a single PAN, can he opt to withdraw from composition scheme in relation to any one GSTIN?

If a person having multiple GST numbers under a single PAN decides to opt out of composition levy in relation to any 1 GST numbers, he will be automatically removed from composition levy for all the GSTIN linked to his PAN.

What is the effective date of withdrawal from composition levy?

  1. Withdrawal by taxpayer:-
    When the taxpayer himself opted out from composition scheme, the effective date of withdrawal shall be:-
    “The date indicated by the taxpayer in Form GST CMP-04”.
    It has been clarified that the date indicated in the form should not be prior to the commencement of the financial year in which such intimation for withdrawal is filed.
  2. Withdrawal by tax authorities:-
    Where the withdrawal from the composition scheme has been initiated by the tax authorities, the effective date of withdrawal shall be:
    “The date as determined by the tax authorities”. The tax authorities can even determine any retrospective date.

Is it compulsory to file Form GST ITC-01 after withdrawal from the composition scheme?

Yes, it is compulsory to file Form GST ITC-01 i.e. a statement containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock on the date on which the option is withdrawal or denied. Such form is to be filed within 30 days from the date of withdrawal.

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