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Composition dealer

This query is : Resolved 

One of the conditions of composition is that a dealer should not have his stock of CST purchase as on 01.07.2017 to opt for composition. What if a dealer by mistake forgot to account an interstate purchase during a pre GST period and the same is unearthed by the assessing authority? Be it a namesake purchase of Rs 1.00? The condition for becoming a composition dealer is violated. May be without his knowledge an interstate dealer billed a sale on him. What would be the consequences? It would make lots of sense if an assessment is made on his pre GST registration without tampering his composition status. Only small dealers who sell goods to the ultimate buyers would follow the composition scheme. If his composition status is annulled how would be the assessment procedures?


If the matter is of so immaterial amounts, then you can claim that purchase having been consumed before 1st July,2017.

Sir, my worry about it is different. There are chances of interstate purchase bills which might have gone unaccounted. Would it affect my client's composition status as in the GST Act it is stated a dealer who opts for composition shouldn't have interstate purchased stock as on 01.07.2017 ie start of GST.

My reply will be same unless there are apparent facts to conclude otherwise.But yes if it is proved then his status as composition dealer may be questioned. As for the consequences, the proper officer may issue notice order under rule 6(4) and order under rule 6 to deny the composition scheme under rule 6(5).From the date of the order the dealer will cease to be a composition dealer and will start paying tax as regular dealer.

So if the officer issues an order as on say 20.09.2020, my client would have to continue as a regular dealer as from that order date. The previous bygone days his composition status being unperturbed. Am I right sir?

I believe it to be so because that is what the rule says though sub rule 1 requires the dealer to fulfill the conditions himself. I would say that the rule can be challenged also because the rule seems to be going beyond restrictions imposed by section 10.

So the conditions to become a composition dealer is very complex it seems. If a dealer by mistake failed to account an interstate purchase during his pre gst period and if it unearthed by the assessing authority, he is no more eligible. One last question sir. If he is required to file returns as a regular dealer with retrospective effect ie from 01.07.2017, will the assessing authority refund him the already paid one percent GST back in his electronic credit register so that he can offset it with the purchase IPT?

In my view, if I assume it happens what you say, there is no mechanism for such adjustment mechanism.One may have to resort to claim refund under section 54 subject to limitation of time allowed to file the refund i.e. 2 years.


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