COMPOSITION PERSON : WHETHER CLOSING STOCK IS TO BE TAXED AT THE TIME OF CANCELLATION OF REGISTRATION

[Deepak Garg]

Sir

One of my client applied for cancellation of registration who was registered under composition scheme. At the time of application for cancellation he has a stock of ₹ 5,00,000/- no ITC was claimed. Please give your expert opinion regarding tax on closing stock. Whether the registered person is liable to tax under section 29(5).

[Alkesh Jani]

Sir,

In this regards, I am of the view that no tax is to be paid under the given circumstances, for this purpose, Section 29 (5) clearly states .... the credit of input tax in respect of inputs held in stock..." and on going through the definition of 'Input Tax' and 'Input Tax Credit' it is very clear that only ITC availed is required to be reversed or paid for the stock held on the date.

Thanks

[KASTURI SETHI]

A composition dealer cannot take ITC. It is not in dispute. Therefore, no ITC is involved on inputs, input services and capital goods and hence Section 29 (5) of SGST Act is not applicable to you. You are not required to pay GST on stocks held as on the date of surrender. I agree with Sh.Alkesh Jani ji.

AI Summary

Composition scheme closing stock not taxable on cancellation where no input tax credit was availed.
A composition registrant who has not availed input tax credit is not required under Section 29(5) to pay tax on closing stock at the time of cancellation; because composition dealers cannot claim input tax credit, the reversal/payment obligation for inputs held in stock does not arise where no ITC was claimed.