GST Summon & Composition Scheme

[Priyesh Mamnani]

My client is a service provider and has received a summon from the CGST Authorities. Until now, he has not obtained GST registration, even though his turnover has exceeded ₹20 lakhs since 2020-21. I am certain that the officer will require him to obtain GST registration and pay the outstanding GST liabilities.

My client's annual turnover has been around ₹22 lakhs from 2020-21 to 2023-24. Therefore, we are applying for registration under the Composition Scheme as per Section 10(2A) and will be paying tax at 6%.

My Question:
Can we apply the Composition Scheme and pay past liabilities (i.e., from 2020-21 to 2023-24) at 6% instead of the regular rate of 18%? Can we avail such relief? or any other relief

[Sadanand Bulbule]

Dear 

In terms of Section 10[1], only a registered person can opt for composition scheme subject to other conditions. So being unregistered during period from 2020-21 to 2023-24, in my personal opinion your client is not eligible for such scheme.

Secondly but for the summon issued by the department, your client would have chosen to remain outside the registration/tax net. Is it not a deliberate decision to remain so?

[KASTURI SETHI]

The Composition Scheme cannot be opted for retrospectively.

[Sadanand Bulbule]

Dear querist,

Refer the following for failure to get registered, despite being liable for registration:

2025 (1) TMI 1429 - MADRAS HIGH COURT - M/S. ANNAI ANGAMMAL ARAKKATTALAI (PRE MAHAL), Vs. THE JOINT COMMISSIONER OR GST (APPEALS), COIMBATORE, THE ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE, KARUR DIVISION.

As rightly pointed out by Sethi Sir, there is no provision for retrospective benefit for composition scheme.

[VENU K]

No composition scheme for past liabilities.

Unregistered persons need to be assessed under Sec 63 on a best judgment basis. If the summons are relating to non registration then you have no options but to pay the demand in most cases.

If the summons are not related to non-registration , then immediately take a registration. Once the person becomes a registered person then proceedings to assess past periods through Sec 63 or even audit under Sec 65 are very difficult. Registration will oust jurisdiction under Sec 63. Even departmental audit   relating to period during which registered person was  unregistered would be  very difficult in my opinion.

So the best course, in my opinion, is to take a registration immediately and take the rest of the proceedings in your stride.

AI Summary

Composition scheme retrospective relief denied; past unregistered liabilities subject to assessment under best judgment proceedings and immediate registration advised. The Composition Scheme cannot be applied retrospectively: only a registered person may opt in, so past unregistered periods are not eligible. Unregistered persons will be assessed on a best judgment basis for liabilities arising during non registration, and immediate registration is advised to change status and help limit subsequent assessment or audit exposure.