Practical Issues For Composition Scheme– Applicability of GSTR 10 And Applicability of Late Fees In CMP – 08
In this article author tries to clarify on the issues regarding applicability of GSTR 10 on the taxable person who opt for paying tax u/s 10 of CGST Act and also about the applicability of Late Fees while filling CMP – 08.
Provision for GSTR 10 – Final Return has been provided in Section 45 of CGST Act read with Rule 81 of CGST Rules, for ease of reference both are reproduced below
|Rule – 81. Final return.
Every registered person required to furnish a final return under section 45, shall furnish such return electronically in FORM GSTR-10 through the common portal either directly or through a Facilitation Centre notified by the Commissioner.
Section – 45. Final return.
Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed.
Based on Reading of Section 45 of the CGST Act it is apparently clear that GSTR 10 is only applicable to the persons who is required to furnish a return under sub-section (1) of section 39, which along with sub-section (2) of Section 39 has been reproduced below
|Section – 39. Furnishing of returns.
(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.
(2) A registered person paying tax under the provisions of section 10 shall, for each quarter or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of turnover in the State or Union territory, inward supplies of goods or services or both, tax payable and tax paid within eighteen days after the end of such quarter.
Therefore a person paying tax under the provision of section 10 (Popularly known as Composition Scheme) is required to file return under sub-section (2) of Section 39 and sub-section (1) of Section 39 clearly exclude them.
Form the Combined Reading of Section 39 and Section 45, we can conclude that GSTR 10 i.e. Provision of Final Return are not applicable the person paying tax under section 10 (Popularly known as Composition Scheme).
It is worthwhile to note that to our fortune GSTN website at present even doesn’t provide option to file GSTR 10 in case a person has opted for Composition Scheme and his GSTN has been cancelled / Surrendered.
But may be due to interpretation issue or otherwise if a person is paying tax under Section 9 (Regular scheme) and afterwards converted into Section 10 (Composition scheme) then in one of our client case GSTN website has activated the option for filling GSTR 10.
To have light on the above issue first we need to refer sub-section (4) section 18 read with Rule 44 of the CGST Rule
|18. Availability of credit in special circumstances.
(4) Where any registered person who has availed of input tax credit opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption:
Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.
Rule 44. Manner of reversal of credit under special circumstances.
(1) The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and finished goods held in stock, and capital goods held in stock shall, for the purposes of sub-section (4) of section 18 or sub-section (5) of section 29, be determined in the following manner, namely,-
(4) The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to the cancellation of registration.
Based on above Sub-section (4) of section 18 and Rule 44 it is clear that when a person who is paying tax under section 9 (Regular Scheme) opt to pay tax under section 10 (Composition scheme) then he has to file form GST ITC – 03 for ITC reversal of ITC calculated in terms of sub rule (1) of Rule 44 and balance ITC if any standing in the Credit Ledger shall be lapsed.
Based on above one can concluded that ITC of a registered person who is earlier paying tax under section 9 of the CGST Act, is required to be reversed if he is opting to pay tax under section 10.
Even it is worthwhile to note that a person to whom sub-section (5) of section 29 (Cancellation / Surrender of GST Registration) applies has to follow same producers but he has to file GSTR 10 instead of ITC-03 statement based on above sub-rule (1) of Rule 44.
To sum up the above discussion, if a person has already filled form ITC 03 at the of conversion from Regular scheme (Section 9) to Composition Scheme (Section 10) then there will not be any balance eligible ITC in his Credit ledger as he has already discharged the tax on stock held on the date of conversion in ITC 03 and therefore GSTR 10 is not applicable to such person.
Even based on my limited understanding and by referring to the formats of both ITC 03 and GSTR 10, can conclude that ITC 03 and GSTR 10 are mutually exclusive.
To begin our discussion for the subject lets first refer to the enabling Rule – 62 of CGST Rules and relevant amendments thereto for CMP – 08.
|Rule 62. (Note-1) Form and manner of submission of statement and return.
(1) Every registered person (Read Note-2) paying tax under section 10 or paying tax by availing the benefit of notification of the Government of India, Ministry of Finance, Department of Revenue No. 02/2019– Central Tax (Rate), dated the 7th March, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub- section (i) vide number G.S.R.189 (E), dated the 7th March, 2019 shall-(i) furnish a statement, every quarter or, as the case may be, part thereof, containing the details of payment of self-assessed tax in FORM GST CMP-08, till the 18th day of the month succeeding such quarter; and
(ii) furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4, till the thirtieth day of April following the end of such financial year, electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.
[xxx] (Read Note-3)
(2) Every registered person furnishing the (Read Note-4) statement under sub-rule (1) shall discharge his liability towards tax or interest payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger.
 These words were substituted for the words “Form and manner of submission of quarterly return by the composition supplier” by Rule 3(a) of the Central Goods and Services Tax (Third Amendment) Rules, 2019, Noti. No. 20/2019 -Central Tax GSR 321(E) dated 23/04/2019.
2 These matter upto the words “such financial year,”is substituted for the words “paying tax under section 10 shall, on the basis of details contained in FORM GSTR-4A, and where required, after adding, correcting or deleting the details, furnish the quarterly return in FORM GSTR-4″ by Rule 3(b)(i) of the Central Goods and Services Tax (Third Amendment) Rules, 2019, Noti. No. 20/2019 -Central Tax GSR 321(E) dated 23/04/2019.
3 Proviso deleted by Rule 3(b)(ii) of the Central Goods and Services Tax (Third Amendment) Rules, 2019, Noti. No. 20/2019 -Central Tax GSR 321(E) dated 23/04/2019.
Prior to deletion, proviso which was inserted by Rule 2(iv) of Central Goods and Services Tax (Ninth Amendment) Rules, 2017, Noti. No. 45/2017 GSR 1251(E) dated 13-10-2017, read as under :
Provided that the registered person who opts to pay tax under section 10 with effect from the first day of a month which is not the first month of a quarter shall furnish the return in FORM GSTR-4 for that period of the quarter for which he has paid tax under section 10 and shall furnish the returns as applicable to him for the period of the quarter prior to opting to pay tax under section 10.
4 These words were substituted for the words “return under sub-rule (1) shall discharge his liability towards tax, interest, penalty, fees or any other amount” by Rule 3(c) of the Central Goods and Services Tax (Third Amendment) Rules, 2019, Noti. No. 20/2019 -Central Tax GSR 321(E) dated 23/04/2019.
Based on above rule 62 as amended via the third amendment to CGST Rules (Notification No 20/2019 dated 23/04/2019) we can conclude that the heading of the rule was amended:
Form “From and Manner of submission of Quarterly return by the composition supplier” to “Form and manner of submission of statement and return”
Future amendment in sub rule (2) of Rule 62 via said notification:
From “Return under sub-rule (1) shall discharge his liability towards tax, interest, penalty, fees or any other amount” to “statement under sub-rule (1) shall discharge his liability towards tax or interest”
Clearly indicate that CMP – 08 is to discharge liabilities towards “Tax and Interest” (words “or” in the amendment has been interpreted as “and” as per rules of interpretation to make it more meaningful) which was before amendment referring to tax, interest, penalty, fees or any other amount.
Even table 3 of from CMP – 08 neither provides a row to enter late fees nor it is auto calculated by GST Portal as it is calculated in case of GSTR 3B.
Further it is worth while note that When NEW RETURN Filling formats having ANX-1 and ANX-2 will be made applicable, there is requirement to file CMP-08 monthly by the person who opting file the quarterly return as their turnover is below mentioned threshold of Rs. 5 crore, above discussion about non payment of late fees in CMP-08 will be as it is applicable or not will only be decided after amendments for NEW Return filling will be made in CGST Rules more particularly amendments in either section 39 of CGST act or Rule 59 of CGST Rules.
(The author is highly grateful to CA. Drashti Sejpal for her valuable contribution at various palaces of this article)
Views express in these articles except the bare act and rules wording as motioned in brackets/italics, are personal views of the author. Author or his associates are no where responsible for any loss or adverse legal consequences caused to any person by relaying on the above views.