Niyati
Business who have switched from the Normal GST Scheme for FY 2025–26 to the Composition Scheme for FY 2026-27 must complete ITC reversal on closing stock and file Form ITC-03 within the prescribed compliance period.
Composition rates for a dealer generally include:
- 1% for traders/manufacturers
- 5% for certain restaurants
- 6% under specific composition-like schemes for service providers
Effective Deadline for ITC-03 Filing
- Date of Composition Scheme: 1 April 2026
- 60-Day Compliance Deadline: 31 May 2026
Failure to comply may result in cancellation of composition benefits and tax rate may increase from 1% to 18%.
Why ITC Reversal Is Required?
If a taxpayer already switched from the Regular GST Scheme to the Composition Scheme, then they cannot retain ITC on opening stock as any ITC previously claimed on goods remaining in stock on the date of switching must be reversed.
In short:
As per Section 18(4) of the CGST Act, the ITC related to the stock or capital goods lying with you as on 31 March 2026 must be reverse.
Missing Deadline
Filing ITC-03 after the prescribed period may still be technically possible, but the department could treat the taxpayer as ineligible for the Composition Scheme, leading to denial of composition benefits.
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