Do you want to switch to the composition scheme for FY 2021-22?

The GST Network (GSTN) has released a fresh advisory for taxpayers opting into the GST composition scheme. The advisory dated 24th March 2021 directs all the regular taxpayers and persons eligible for the composition scheme to file an intimation or declaration by 31st March 2021 for opting into the scheme for the upcoming financial year 2021-22.

All the businesses that have already opted in to the past composition scheme and intend to continue for FY 2021-22 need not file the declaration. Further, CGST Rule 5(2) also clarifies the same.

The rest who intend to join the scheme must file form CMP-02 by 31st March 2021. Newly eligible taxpayers can opt into the composition scheme after logging into the GST portal by filling this form. The composition scheme will be available for these taxpayers with effect from 1st April 2021 upon the filing of the form CMP-02.

The advisory also informs the taxpayers about the eligibility to join the scheme. Any regular taxpayer not wishing to claim input tax credit may benefit from the scheme if the turnover criterion is met. A dealer or manufacturer of goods must have a PAN-level or aggregate turnover of up to Rs.1.5 crore in the previous financial year.

However, this limit is relaxed in a few states such as Tripura, Manipur, Meghalaya, Mizoram, Nagaland, Arunachal Pradesh, Sikkim and Uttarakhand. In case the taxpayer is supplying services or is into mixed supplies, the aggregate turnover of the previous fiscal year has to be equal to or below Rs.50 lakhs for him to be eligible under the scheme.

There are a few exceptions where businesses will not be eligible for the scheme. These include persons having interstate supplies, making supplies through e-commerce operators subject to Tax Collected at Source (TCS) under GST, making exempt supplies, or manufacturing certain notified goods such as aerated water, tobacco and manufactured tobacco substitutes, ice cream and other edible ice, whether or not containing cocoa, and pan masala.

After logging into the GST portal, the businesses must navigate to the ‘Services’ tab, go to the ‘Registration’ tab, click on the ‘Application to opt for the Composition Scheme’ link. Thereafter, they must fill the form CMP-02 and file it using DSC or EVC.

Other than CMP-02 filing, the taxpayers who were regular in the previous financial year, but are opting into the composition scheme for FY 2021-22 for the first time, must file another form ITC-03. This form is filed for reversing any input tax credit claimed on stocks of inputs, semi-finished goods and finished goods available with them within sixty days from the effective date of opting-in, mostly by 30th May 2021.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in

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