Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

Law Related Issues

24. Ineligibility to opt for Composition Scheme if assessee has interstate purchased stock

Rule 5 of CGST Rules, 2017 provides that the person exercising the option to pay tax under
section 10 shall comply with the following conditions, namely:

a) he is neither a casual taxable person nor a non-resident taxable person;
b) the goods held in stock by him on the appointed day have not been purchased in the
course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 3;
c) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section (4) of section 9;
d) he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of goods or services or both;

e) he was not engaged in the manufacture of goods as notified under clause (e) of sub-section (2) of section 10, during the preceding financial year;

f) he shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him; and
g) he shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.

Issue

There may arise a situation wherein an assessee who has been granted provisional
registration and wishes to opt for Composition scheme satisfies all the conditions specified
in Rule 5 of CGST Rules, 2017 except that he holds the stock which has been purchased in
the course of inter-State trade or commerce or imported from a place outside India or
received from his branch situated outside the State or from his agent or principal outside
the State.

A further a condition provides that his stock should not include goods purchased from an
unregistered dealer where tax has not been paid under reverse charge. But if he pays tax
under reverse charge he is eligible to opt for Composition Scheme. Such a relaxation for
payment of tax and opting for Composition levy is not available in case of purchases made
in the course of inter-State trade or commerce or imported from a place outside India or
received from his branch situated outside the State or from his agent or principal outside
the State.

Also, Section 10 only restricts inter-state outward supply of goods, no restriction w.r.t.
inter-state purchase or purchase from unregistered dealer.

Suggestion:
It is suggested that in case where the person wishing to opt for Composition Scheme holds
such goods in stock which have been purchased in the course of inter-State trade or
commerce or imported from a place outside India or received from his branch situated
outside the State or from his agent or principal outside the State, he be allowed to opt for
Composition Scheme upon payment of appropriate applicable tax under GST.

Read Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

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