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How to opt out of GST composition scheme

  • Setindiabiz Team
  • July 1, 2024
How to opt out of GST composition scheme?
How to opt out of GST composition scheme?

Though the GST Composition scheme is said to be a simplified form of GST, a business may sometimes need to opt out of composition scheme GST in certain conditions. Form CMP-04 is required to file for opting out of composition scheme. Similar to other regulatory tasks, several steps are involved in the process of opting out from composition scheme under GST. Go through the below post to learn about how to convert composition to regular in GST in a step by step process along with checking its status online before the deadline or last date!

BRIEF SUMMARY
A taxpayer is required to file an application in order to withdraw or opt out of the GST Composition Scheme. The application must be filed in Form GST CMP-04 in order to withdraw from the GST composition Scheme. Additionally, the taxpayer is also required to provide the details of stocks contained in finished as well as semi-finished goods in the form of GST ITC-01. Once the application for opting out has been filed, the taxpayer has to intimate the stock details within 30 days from the date of filing of the application.

How to opt out from Composition Scheme under GST?

Taxpayers who have enrolled in the GST Compositions scheme, can easily opt out of the composition scheme through a 100% online process. The process of opting out from the composition scheme under GST can be executed on the GST portal itself. Given below is a stepwise procedure to opt out of the Composition scheme GST on the GST portal.
Step 1: Login to your account on the GST portal by entering your login credentials i.e. username and password.
GST Login
Step 2: Post logging-in to your account with valid login credentials, explore the “Services” section. Then, click on “Registration” in the same section. Later on, go to the section “Application for Withdrawal from Composition Scheme”.
GST registration Steps
Step 3: On clicking the Application page, it will redirect you to “Intimation/Application for Withdrawal from Composition Levy” page. On that page, a section “Date” will appear, select the relevant date from the calendar. It is to be noted that the date for withdrawal of composition scheme under GST Levy cannot be prior to the date on which Composition Levy was opted. Also, there will be a section “Reason” where you need to select the reason for opting out from the drop down list.
Step 3
Step 4: Below the date and reason sections, you will find a declaration section called “Composition Declaration”. In the section, do check and agree to the terms, conditions and restrictions that come under the “Composition Levy”.
Step 4
Step 5: Below the “Composition Declaration”, find a section named “Verification”. On clicking on this verification, you are confirming that all the information you have provided is true and nothing has been concealed from the relevant authority.
Step 5
Step 6: Click on both the boxes “Verification” and “Composition Declaration”, after that select the name of the Authorized signatory, enter the place of signature, and afterward click on the “Save” option.
Step 7: Sign / verify the form using the options “EVC” or “DSC”. Please note using DSC needs EmSigner software for the GST portal.

Sign using DSC

If you want to proceed using DSC, then Click on the “Submit with DSC” option. Later on, hit the “Proceed” button.
Step 7
Step 8: Now, on your screen, the emSigner page will appear. After that select the appropriate signature and then click on the ‘Sign’ button.
Step 8
Step 9: Sign using EVC
  • Click on the “Submit” button with EVC.
  • The system will send an SMS and an email to the registered mobile number and email address containing an OTP.
  • Enter the OTP and authenticate.
  • After the authentication is done, you will receive a “Success” message on your phone.
  • An ARN (Application Reference Number) will be generated and the same will be sent via the SMS and email address within 15 minutes of the completion of the authentication.

Check Updated Status in Profile on the GST Portal

After completing the application for withdrawal from the Composition Scheme successfully, you can confirm the changes made by visiting his or her profile on the GST portal. Login into the account and go to the section ‘Taxpayer Type’. There you can see that the status will be changed from ‘Composition’ to ‘Regular’.
step 9

Will opting out from the GST Composition Scheme affect the Input-Tax Credit?

After a taxpayer opts out of the GST Composition Scheme, he or she comes under regular taxation scheme under GST. Further, the taxpayers become eligible to claim Input Tax Credit on the purchases made by them after opting out of the GST Composition Scheme. However, Input Tax Credit can be availed only if the following conditions are fulfilled:
  1. The Input Tax Credit can be claimed on the goods bought for production of taxable supplies.
  2. The document and invoice based on which the Input Tax Credit is to be claimed must be available.
  3. The date on the invoice must be within 12 months from the date of appointment.
  4. Reduction of the credit on capital goods by certain percentage as it may be prescribed.

With the above analysis, it is clear that, to opt out of the GST Composition Scheme on the GST Portal, the taxpayer must have his or her login ID and Credentials to login into the system and apply for “Composition Levy”. It is also to be noted that, a taxpayer can claim his Input Tax Credit again after withdrawal from the Composition Scheme under GST provided certain conditions are to be fulfilled. Thus, after opting out of the GST composition scheme the taxpayer becomes a Regular taxpayer under GST.

Consult a professional firm having specialization in GST filing and other company compliances to get your opting out of GST Composition scheme process completed within a quick and shorter time span!

Conclusion

FAQs

Q1: Can a Composition Dealer avail Input Tax Credit?

No. A composition Dealer cannot avail Input Tax Credit. A taxpayer who has opted for the Composition Scheme to pay taxes under GST cannot take tax credits for his or her input supplies.

Q2: Can a taxpayer opt for a Composition Scheme and later change it to the Regular Scheme?

Yes. A taxpayer can switch between Composition Scheme and Regular Scheme based on his annual turnover. The switch over has to be declared on the GST portal. However, such changes can lead to some alteration in the issuance of invoice and filing of GST returns.

Q3: Can a taxpayer withdraw from the Composition Scheme?

Yes. A taxpayer can withdraw from the composition scheme at any point of time during a financial year due to the below mentioned reasons;
  • Voluntary withdrawal
  • Engaged in supply of goods that are not taxable under GST Act
  • Exceeding the threshold limit as mentioned under Section 10 of the Central Goods and Service Act.
  • Manufacturing of Notified Goods
  • Supply of goods through an e-commerce operator
  • Inter-State Supplies

Q4: How can a taxpayer withdraw from the Composition Scheme on the GST Portal?

In order to withdraw from the GST Composition Scheme, a taxpayer needs to browse the GST portal and log-in to his or her account with the right login credential. After successfully logging into his or her account on the GST Portal, the taxpayer needs to navigate to the Services > Registration > Application for Withdrawal from Composition Levy and fill the form accordingly.

Q5: When is a taxpayer required to withdraw from the Composition levy?

An application for withdrawal from the Composition Scheme, needs to be filled within 7 days from the date when the taxpayer becomes ineligible to fulfill the conditions as prescribed under Section 10 of the Central Goods and Service Tax Act/ State Goods and Service Tax Act.

Q6: Which form is required to be filled to withdraw from the Composition Scheme?

Form GST CMP-04 needs to be filled in order to withdraw from the Composition Scheme.

Q7: Does a taxpayer require any approval from Tax authorities to opt out from the Composition Scheme under GST?

No. A taxpayer does not need any approval from the tax authorities in order to opt out from the Composition Scheme under GST.

Q8: Is it compulsory to file an Intimation of Stock Details after withdrawal from the Composition Scheme?

Yes. It is necessary for a taxpayer to file an intimation of stock details after opting out from the composition scheme.            

A taxpayer should file a statement using Form GST ITC-01 that should also consist of details related to stock input, semi-finished goods, and finished goods held by him on the date on which the option was denied, within 30 days from the application filing date for withdrawal from GST Composition Scheme.

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