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Withdrawal from GST composition scheme

Composition dealers can opt-out of the GST composition scheme at any time during the relevant financial year in any of the two ways:

  • Voluntarily opt out of composition levy or
  • Compulsorily removed out of composition levy by the Tax Official.

Withdrawal reasons may include:

  1. Annual turnover exceeds the specified threshold limit
  2. Engaged in making any non-taxable supplies.
  3. Engaged in making inter-state supplies (supplies outside the state).
  4. Supplying of goods through E-Commerce Operator, who is required to collect tax at source under section 52 of CGST act
  5. Engaged in manufacturing notified goods (e.g. pan masala, tobacco products)
  6. Fails to comply with any other conditions of the scheme

Voluntary withdrawal

In case of voluntary withdrawal,

  • Composition dealer opt-out of the composition scheme by his choice.
  • Dealer is required to file withdrawal application in form GST CMP-04 on the GST portal.
  • Once the application for withdrawal is filed, auto-approval will get immediately and the dealer will no more liable to pay tax under the composition scheme.

Compulsory withdrawal

If the taxpayer does not exit the composition levy within 7 days of disqualifying event, proceedings for compulsory withdrawal can be initiated by the proper officer.

(a) Tax officer will give the opportunity of being heard to the taxpayer by issuing SCN before the compulsory withdrawal.

(b) Taxpayer has to file the reply within 15 days from the date of issue of notice

(c) Officer will within 30 days drop proceedings or withdraw composition levy.

(d) If the reply is not filed by the taxpayer within 15 days from the date of issue of SCN, the officer can only “withdraw application”.

After compulsory withdrawal,

  • GST Portal will generate an order for withdrawal.
  • Taxpayer, as well as all GSTINs, mapped to the same PAN will be intimated about withdrawal via e-mail and SMS.
  • GST Portal will remove the ‘Composition’ flag, against all the GSTINs mapped to the same PAN.
  • Information about compulsory withdrawal will be passed on to the concerned State/Centre Tax Authorities of such GSTINs.

GST website - Steps to withdraw from composition scheme

Step 1: Visit the login page of the Common portal and enter login credentials

Step 2: To access the withdrawal application, navigate to the Services > Registration > Application for withdrawal from composition levy

Step 3: Now you are on the "Application for withdrawal from composition levy" page. Enter the following details on this page-

  • Select the reason for withdrawal from the drop-down list.
  • Select the date from which composition levy is sought.
  • Select the Verification checkbox.
  • In the Name of Authorized Signatory drop-down list, select the name of the authorized signatory.
  • In the Place field, enter the place where the form is filed.
  • Click the SAVE button to save the data.

Step 4: Submit the application using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code) option.

In the case of DSC,

  • Click the "SUBMIT WITH DSC" option
  • Now, a warning pop-up will be displayed on your screen. Click the "Yes" button.
  • Select the certificate and click the "SIGN" button.

In the case of EVC,

  • Click the "SUBMIT WITH EVC" button.
  • Enter the OTP sent to the email and mobile number of the Authorized Signatory registered at the GST Portal and click the "VALIDATE OTP" button.

The success message will be displayed on the screen. You will receive the acknowledgment with ARN receipt in the next 15 minutes on your registered e-mail address and mobile phone number.

Frequently asked questions (FAQs)

Listed below are the pre-conditions for compulsory withdrawal from composition levy:

  • Taxpayer has a valid and active GSTIN.
  • Composition Taxpayer has successfully submitted “Application to Opt for Composition levy” for the subsequent financial year or applicant is flagged as composition taxpayer as on the current date.

On issue of SCN to taxpayer for compulsory withdrawal, taxpayer needs to file a reply within 15 days from date of issue of such notice.

Navigate to Services > User Services > View Notices and Orders option to view the notice and order issued by Tax Official for Compulsory Withdrawal.

If any new registration application is filed mapped to the same PAN and is pending for processing with the tax officer, which is not approved or rejected, the decision of the approval/ rejection of proceeding for compulsory withdrawal will also apply to the new GSTIN as applicable.

After issue of “Order for Compulsory Withdrawal from Composition levy”, any new Registration (GSTIN) granted over the same PAN (having effective date of Registration earlier than withdrawal date), will be treated as “Composition” till the date of withdrawal of composition and deemed to be flagged as “Normal” from the date of withdrawal of composition.

For example: If the effective date of registration is 2nd Jan 2019 and withdrawal from composition date is 11th Jan 2019. In such case, the GSTIN will be treated as composition till 11th Jan 2019 and Normal from 12th Jan 2019.

Once a tax official drops the proceedings for compulsory withdrawal of a taxpayer from composition levy:

  • GST Portal will generate an order for dropping of proceedings.
  • Taxpayer will be intimated about dropping of proceedings via e- mail and SMS.
  • Information about dropping the proceedings will be passed on to the concerned State/Centre Tax Authorities of such GSTINs.

Various statuses for compulsory withdrawal of a taxpayer from composition levy are:

  • Pending for Clarification: On issuance of SCN and pending reply by taxpayer
  • Pending for Order: On receipt of reply to SCN and pending order by Tax Official
  • Order Issued: On passing of order for withdrawal by tax official
  • Proceeding Dropped: On passing of order by tax official for dropping of SCN


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TaxGyata Team

TaxGyata Team