2023 (2) TMI 930 - HC - GST

GST composition scheme registration validly cancelled from export transaction date, not application date under Section 10

SKP Pharmachem Versus Union Of India

Gujarat HC held that petitioner's GST composition scheme registration was validly cancelled from the date of export transaction (16.3.2022) rather than ... Withdrawal from the composition permission - grievance on the part of the petitioner is composition permission was withdrawn with effect from 8.4.2022 i.e. the date on which the application of the petitioner was made, the portal did not allow him to retrospectively withdraw from the composition permission and hence, the petitioner raised a grievance with the GST helpdesk on 12.5.2022. HELD THAT:- The Petitioner’s composite permission was effective from 26.12.2021. According to him, it never had supplied by making use of such composition permission be that it may, it had already filed the return which had expected to file in the month of January. Prescribed for those who are availing the composition benefit, admittedly the petitioner has filed CMP-08 returns but not the GSR 1M/GSTR-1Q and GSTR 3B/M/GSTR-3B Q returns which are meant for for regular/normal taxpayers for the period from the date of registration i.e. 26.12.2021 till the date it applied for cancellation to say that it was not aware of the registration under the composition scheme under Section 10 of CGST Act is not something believable and to say that he could come to know this mistake of even while filing of return of his income is also not believable. It is taken the GST registration under the composition scheme, the option is always with the taxpayer and it is his first application for the cancellation of this registration under the composition scheme had come on 8.4.2022. It is case of the petitioner that he got an order for export in March, 2022. He had already exported the goods to say that he was unaware of such operation under the composition permission and was not entitled to the expert goods under such permission is not acceptable. In the instant case as can be noticed, his expert has been made on 16th March, 2022, as per this provision he ceases to satisfy the conditions mentioned in Section 10 of CGST Rule and therefore, his request for cancellation of registration under the composition permission shall need to be essentially from the date on which, he had breached the condition stipulated in section 10 of the CGST Act. To that extent, the petitioner is right that the moment he entered into the export transactions would become entitled for composition permission because of provision of Section 10 and his permission is required to be cancelled with effect from the date of export transaction. While acceding to his request of such permission to be treated to have been cancelled from 16th March, 2022. The respondent-authority is also directed to take care of the software. Let their limitations be also addressed by the highest authority. Petition disposed off. Issues Involved:1. Non-cancellation of composition permission under the GST Act.2. Retrospective withdrawal from the composition scheme.3. Filing of returns as a regular taxable person.4. Treatment of the petitioner as a return defaulter.5. Functionality limitations on the GST portal.Detailed Analysis:Non-cancellation of Composition Permission under the GST Act:The petitioner, a proprietorship concern registered under the GST Acts, challenged the non-cancellation of composition permission. The tax consultant erroneously chose the composition option during registration on 26.12.2021. The petitioner did not use the composition permission for any supply. In March 2022, the petitioner exported goods, unaware of the composition permission restrictions. Upon realizing the error, the petitioner applied for withdrawal from the composition levy on 8.4.2022, citing the export transaction as the reason. However, the GST portal only allowed prospective withdrawal, not retrospective.Retrospective Withdrawal from the Composition Scheme:The petitioner sought retrospective withdrawal from the composition scheme effective from 1.3.2022 to file returns as a regular taxable person. The GST helpdesk responded that retrospective cancellation was not feasible due to portal limitations. The petitioner argued that Rule 6(2) of the CGST Rules supports immediate cessation of composition permission from the date of breach of conditions. The Court agreed, stating that the petitioner's composition permission should be canceled from the date of the export transaction, 16.3.2022, as per Section 10 of the CGST Act.Filing of Returns as a Regular Taxable Person:The petitioner faced difficulties filing returns as a regular taxable person for March 2022 due to the composition permission. The jurisdictional officer and GST helpdesk acknowledged the portal's inability to allow retrospective cancellation. The Court directed that the petitioner's composition permission be treated as canceled from 16.3.2022, enabling the petitioner to file returns and pay taxes as a regular taxable person.Treatment of the Petitioner as a Return Defaulter:The petitioner was issued a notice on 27.6.2022 as a return defaulter for not filing returns. The petitioner contended that the officer's action of treating him as a defaulter was unjust, given the genuine difficulties faced. The Court acknowledged the petitioner's grievances and directed the respondent authorities to cancel the composition permission retrospectively from 16.3.2022, thus addressing the defaulter issue.Functionality Limitations on the GST Portal:The GST portal's inability to allow retrospective cancellation was a significant issue. The Court emphasized that the limitations of the software should not hinder the implementation of statutory provisions. The Court directed the respondent authorities to address the software limitations and permit the petitioner to file returns and pay taxes as a regular taxable person from 16.3.2022.Conclusion:The Court concluded that the petitioner's composition permission should be canceled retrospectively from 16.3.2022, the date of the export transaction. The respondent authorities were directed to address the software limitations and decide the petitioner's tax liability within two weeks. The petition was disposed of accordingly, with direct service permitted.