COMPOSITION SCHEME

[Shreyansh Agrawal]

DEAR EXPERTS,

MY CLIENT IS A REGULAR DEALER UNDER VAT. NOW HE OPTED COMPOSITION SCHEME UNDER GST BUT STOCK HELD ON APPOINTED DAY INCLUDE TAXFREE, TAXABLE AND EVEN HE HAS STOCK WHICH ARE PURCHASED FROM UNREGISTERED DEALER. IN TRANSITIONAL PROVISIONS OR ANY OTHER SEC OF GST HAS NOT MENTIONED THAT YOU HAVE PAY TAX FOR INPUT HELD IN STOCK FOR WHICH CREDIT IS TAKEN OR FIRSTLY, IT IS TAXFREE UNDER EARLIER LAW AND NOW IT BECAME TAXABLE UNDER GST OR YOU HAVE TO PAY TAX ON REVERSE CHARGES BASIS PURCHASED FROM UNREGISTERED DEALER UNDER EARLIER LAW . WHETHER MY INTERPRETATION TO THE SEC IS CORRECT???

[Rajagopalan Ranganathan]

Sir,

As per Section 10 (4) of CGST Act, 2017 "a taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

Therefore since your client has opted for composition scheme he is not eligible to take credit of duty paid on the stocks held as on the date on which he opts for composition scheme.

[KASTURI SETHI]

Yes Sir. Your interpretation is correct. Stock held by your client has to be cleared on payment of GST to be eligible for composition scheme. Section 10 attaches more strings in addition to this one.l

[Himansu Sekhar]

You need not past tax on reverse charge on the goods purchased before first July from unregistered person

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Ranganathan

[SELVAKUMAR MUTHURAJ]

Regular VAT dealer with Closing stock of ₹ 15,00,000 and there is no ITC as per last VAT return. Now he opts for Composition under GST. Whether he needs to pay tax on the closing of ₹ 15,00,000 as per Sec.18(4) of CGST Act

AI Summary

Composition scheme: opting dealers cannot claim input tax credit on existing stock and must discharge GST to clear it. Composition scheme applicants cannot claim input tax credit on stocks held at the time of opting; Section 10(4) bars entitlement to input tax credit and collection of tax by composition taxpayers, so pre-existing stock must be cleared by payment of GST. Commentary in the discussion notes that reverse charge need not be paid for goods purchased from unregistered suppliers before the commencement date, while cautioning that Section 10 contains additional eligibility constraints for composition status.