• COMPOSITION SCHEME: the scheme introduced with the perspective of easing the business for small traders and manufacturers and for providers of certain services, it has been subject to contentions and amendments since its inception. A new issue that has recently popped up is regarding the time line constraints in filing of forms required for opting the scheme.

Intimation for composition levy – Rule 3(3) of CGST Rules 2017 requires that for opting the scheme, a registered person is required to file Form GST-CMP 02 prior to commencement of the financial year for which the scheme is sought after. However looking at the prevailing circumstances it appears that procedural and filing requirements cannot be complied with. So it was requested to the government to grant certain reprieve in this respect.

  • Pandemic Relief :

Owing to the present scenario and acknowledging the problems that are being faced by business persons across all the sectors Government videNotification 30/2020 CT, dated 03.04.2020  along with Circular No. 136/06/2020-GST dated 03.04.2020 has provided for the following relaxations:

  1. Normal Taxpayers who wish to opt for the scheme for financial year 2020-21 can do so by filing GST-CMP 02 by 30th of June 2020.
  2. Taxpayers who have already opted for the scheme in the previous financial year need not re-opt for the scheme for FY 20-21.
  3. GST –ITC 03 for reversal of ITC in respect of inputs held in stock, inputs contained in semi-finished goods and finished goods and capital goods held in stock at the time of transition to the scheme can be filed till 31st of July 2020.
  1. IMPLICATIONS IF THE FORM IS FILED BELATEDLY: It is construed from the reading of notification that the intent of issuing is to address the difficulties that were being faced in complying with provision of Rule3 and nothing else. So here are certain things to be taken note of:  

Effective date for composition levy– Perusal of Rule 4 of CGST Rules 2017, provides that where intimation in the required form is filed under sub rule (3) of Rule3, composition scheme shall be effective from the commencement of financial year.

 Applying the same analogy, a person who is filing the requisite form by 30th of June 2020, the scheme shall be considered to be  operative  from the beginning of the financial year.

Return and Invoice related issues A care has to be exercised by the willing taxpayer that, if he is filing GST-CMP 02 tardily no return i.e GSTR1 and GSTR 3B for the corresponding period has been/should be filed else he shall  not be eligible to opt  the scheme.

This can be attributed to the intention of the Government that is primarily and predominantly concerned with procedural relaxations in the wake of COVID 2019.

 Further, provisions of section 31(3), requires a registered person paying tax under section 10 to issue    bill of supply instead of tax invoice against any supply made him. This means that a composition supplier legally cannot issue tax invoice for any supply made by him.

So person who is already registered as a normal supplier in the previous financial year (2019-20)  and is planning to switch to the scheme should ensure that in respect of supplies made by him during the period beginning from 1St of April,2020 till he files the Form (CMP 02)  for exercising the option, he issues Bill of supply instead of tax invoice. Issuing Tax invoice will outrighlty disqualify him to opt for this scheme.  

Final Takeaway- It is again reiterated that taxpayer should exercise immense caution where he is filing the form belatedly. He is advised to check if he is still eligible for the scheme. An erred exercise will make him subject to provisions of sub-section (5) of Section 10 which empowers proper officer to determine along with tax actually payable, amount of penalty applying the provisions of section 73 or 74 as the case may be.

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