GST Composition Scheme

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This discussion clarifies the tax implications when cancelling a GST registration under the composition scheme. Unlike regular dealers, composition dealers generally do not need to pay a 1% tax on stock held at the time of cancellation because they haven't claimed Input Tax Credit (ITC). The requirement to pay tax on stock is primarily for regular taxpayers who have availed ITC.

CA Amit Sarjani

CA Amit Sarjani (Querist)

08 February 2020 If we cancel registration of Composition Taxable Person in GST, then do we need to pay 1% on stock lying with him on the date of cancellation?

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)

08 February 2020 No this requirement is not there for a composition dealer as he is not availing ITC on inputs.

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CA Amit Sarjani

CA Amit Sarjani (Querist)

08 February 2020 Thanks for your reply. However, just for clarification, It is mentioned in the GST Act that at the time of cancellation, taxable person is supposed to pay amount equal to ITC or output tax, whichever is higher. In this case, ITC would be zero, but output tax is 1% , hence, liability would not come out to be 1%? I am not sure but asking you for further clarification.

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)

08 February 2020 this requirement is only for taxable person who is registered as a regular dealer. In case before cancellation his credit ledger balance is showing he needs to reverse the same.

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