composition

[AMIT BATHAM]

A dealer has two firms with the same pan number; one is for retail and is registered for medication, while the other is for whole sale and is registered for FMCG goods. When the dealer applied for composition in one firm with a turnover of less than 50 lacs, the second firm instantly opened in composition. When he discovered that if one registered person has the same pan, the registered person shall not be allowed to opt composition, he withdrew the composition application. However, for the two months of April and May, he submitted CMP-08 and stated turnover nil, and all of the turnover that should have been disclosed in April and May was declared in the month of JUNE and paid regular tax after adjusting the ITC (april+may+June). Now the department is claiming that because you were composition, you are ineligible to claim input tax.

Now my question is, can the department deny input tax credit despite the fact that the applicant never applied the composition in that firm and second, he paid tax on a regular basis including composition period (April & May) declared in june, and if so, why was the system allowed to dealer the file composition application because turnover of both firms far exceeded the threshold limit?

There was no revenue loss, only a technical error owing to a lack of knowledge of the legislation, so what should be done now that the matter belongs to the fiscal year 2020-2021?

AI Summary

Composition scheme eligibility recorded by portal may not bar input tax credit when regular tax was later paid and no revenue loss occurred.
A taxpayer with two firms under the same PAN had composition status recorded for one firm by the portal for two months, withdrew composition, filed nil CMP-08 for those months, and later declared and paid regular tax while adjusting ITC. The department proposes denying input tax credit because composition status allegedly applied; advisers recommend litigating the denial, relying on absence of revenue loss, acceptance of higher output tax, and the portal's procedural failure to resist disallowance.