How TaxBuddy Helps Composition Dealers Transition to Regular GST When Turnover Grows
- Nimisha Panda
- Jan 20
- 9 min read
When a business operating under the GST composition scheme crosses the prescribed turnover limit, a mandatory shift to the regular GST scheme becomes unavoidable. This transition affects invoicing, return filing, tax rates, and eligibility for input tax credit. Missing timelines or filing incorrect forms during GST filing can result in penalties and loss of benefits. TaxBuddy simplifies this transition by guiding composition dealers through exit formalities, GST portal filings, return changes, and compliance updates. With structured workflows and expert-backed tools, growing businesses can move to the regular GST scheme smoothly while staying fully compliant from the effective date.
Table of Contents
Understanding the GST Composition Scheme and Its Exit Rules
The GST Composition Scheme is designed for small businesses that prefer simplified compliance and lower tax rates. Under this scheme, taxpayers pay tax at a fixed percentage of turnover and file limited returns. In exchange, they cannot collect GST from customers or claim input tax credit. The scheme works well at an early stage, but it comes with strict eligibility conditions. Once turnover crosses the prescribed limit or business activities expand beyond permitted boundaries, exit from the scheme becomes compulsory. Delayed exit or incorrect continuation can trigger penalties, interest, and denial of credits under the GST law.
When Turnover Exceeds ₹1.5 Crore: Mandatory Switch to Regular GST
Crossing the ₹1.5 crore turnover limit on a pan-India basis automatically ends eligibility for the composition scheme. For certain special category states, the threshold is lower. The switch to regular GST is not optional once the limit is breached. The transition applies from the exact date on which turnover exceeds the threshold, not from the next financial year. From that date onward, normal GST provisions apply, including standard tax rates, invoice-based taxation, and monthly or quarterly return filing obligations.
Forms and Filings Required to Exit the Composition Scheme
Exiting the composition scheme involves a defined sequence of filings on the GST portal. Form GST CMP-04 must be filed to formally intimate withdrawal from the scheme. This must be done within the prescribed timeline to avoid non-compliance. After opting out, the dealer is required to file a final GSTR-4 return covering the period up to the date of exit. From the transition date, regular returns such as GSTR-1 and GSTR-3B become applicable. Each filing plays a role in ensuring continuity of compliance and accurate tax reporting.
Changes After Switching to Regular GST Compliance
Once under the regular GST scheme, compliance requirements expand significantly. Businesses must issue tax invoices instead of bills of supply, charge GST at applicable rates, and report outward supplies in detail. Return frequency increases, and reconciliation between sales, purchases, and GST returns becomes critical. Reverse charge liabilities, e-invoicing requirements where applicable, and stricter record-keeping standards also come into play. These changes require operational readiness and timely reporting to avoid mismatches and notices.
Input Tax Credit Eligibility After Moving to Regular GST
One of the biggest advantages of switching to regular GST is eligibility to claim input tax credit. Credit can be claimed on eligible stock of inputs, semi-finished goods, and finished goods held on the date of transition, subject to documentation and time limits. Proper stock statements and tax invoices are essential for claiming this credit. Input tax credit cannot be claimed retrospectively for the period under the composition scheme, making accurate cut-off calculations important during the transition phase.
Bank Account and Registration Updates During GST Transition
Moving from the composition scheme to regular GST often requires careful review of registration details already available on the GST portal. One of the most critical updates during this phase is bank account linkage. Under regular GST, accurate bank details are essential for refund processing, return validations, and future compliance communication. Any mismatch or inactive account can delay refunds or trigger portal-level errors during filing.
The GST portal allows taxpayers to add or modify bank account details through a non-core amendment. Up to ten bank accounts can be linked to a single GST registration, offering flexibility to businesses operating multiple current accounts. If bank details were not added at the time of registration or if the business has opened a new current account after scaling operations, updates should be completed immediately after the transition.
Supporting documents are required to validate bank details. These typically include a cancelled cheque, bank statement, or passbook copy showing the business name, account number, and IFSC. The account must be KYC-compliant and linked to the registered PAN to avoid verification failures. In addition to bank details, businesses should also recheck other registration fields such as principal place of business, additional places of business, and authorised signatory details to ensure consistency with current operations.
Delays in updating registration information can create downstream issues. Refunds arising from excess tax payments or input tax credit may remain stuck, and future amendments or filings may face validation errors. Platforms like TaxBuddy help businesses understand which details require updating during the transition and guide them through the amendment process on the GST portal, ensuring that compliance remains uninterrupted as the business moves into the regular GST framework.
How TaxBuddy Simplifies the Composition to Regular GST Switch
TaxBuddy supports businesses at every stage of the transition from composition to regular GST. The platform helps track turnover thresholds, guides users on timely filing of CMP-04, and ensures final and regular returns are filed correctly. Structured workflows reduce confusion around eligibility, timelines, and documentation. By combining automated checks with expert-backed support, TaxBuddy helps businesses shift to regular GST without compliance gaps or filing errors.
GST Compliance Support and Ongoing Monitoring with TaxBuddy
Post-transition compliance under regular GST extends far beyond the initial exit filings. Businesses are required to follow a structured cycle of monthly or quarterly return filing, tax payment, invoice-level reporting, and periodic reconciliations. Even small mismatches between sales data, purchase records, and GST returns can lead to notices or blocked input tax credit. Regular tracking of due dates, return status, and liability summaries becomes essential to avoid late fees, interest, and compliance gaps.
TaxBuddy supports this phase by offering a guided compliance framework that helps businesses stay on track throughout the year. Automated reminders ensure that return deadlines are not missed, while structured filing workflows reduce the chances of errors during GSTR-1 and GSTR-3B submissions. The platform also helps users understand data consistency requirements, making it easier to identify discrepancies early rather than during departmental scrutiny.
As GST regulations continue to evolve, staying updated is equally important. TaxBuddy assists businesses by translating regulatory changes into clear, actionable guidance, ensuring compliance remains aligned with current rules. When complexities arise, such as reverse charge applicability, amendments, or reconciliation challenges, access to expert assistance provides additional confidence. This ongoing support allows growing businesses to meet GST obligations consistently while maintaining focus on operational expansion instead of administrative follow-ups.
Latest GST Updates Impacting Composition Dealers
Recent GST Council decisions have increasingly focused on making compliance under the regular GST scheme more practical and less time-consuming, especially for growing businesses that move out of the composition scheme. While the turnover limits for composition dealers have been retained to provide stability for small taxpayers, the compliance framework for regular taxpayers continues to be refined. The introduction of GST 2.0 reflects this direction, with an emphasis on smoother return filing, better data matching, and reduced manual intervention.
For composition dealers transitioning to the regular scheme, these changes mean greater reliance on system-driven validations and tighter alignment between invoices, returns, and tax payments. Return formats and filing processes are being structured to improve accuracy and reduce mismatches, which also increases the importance of timely and correct reporting. At the same time, the government is working towards simplifying procedural aspects so that compliance does not become a bottleneck for business expansion.
Although no major changes have been announced specifically for composition thresholds, regular scheme compliance is becoming more dynamic, with periodic updates to filing rules, timelines, and reporting requirements. Businesses that have already crossed the turnover limit, or are close to doing so, need to remain alert to these developments. Staying informed helps ensure smooth transitions, prevents avoidable notices, and allows businesses to adapt their compliance processes in line with evolving GST regulations.
Conclusion
Moving from the composition scheme to regular GST is a sign of business growth, but it also introduces higher compliance responsibility. Timely exit, accurate filings, correct ITC claims, and updated registration details are critical for a smooth transition. With structured guidance and ongoing compliance support, TaxBuddy helps businesses manage this shift confidently.For businesses seeking support with GST compliance and tax filing, downloading theTaxBuddy mobile appoffers a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers both self-filing and expert-assisted plans to suit different taxpayer needs. The self-filing option is designed for individuals and businesses comfortable with entering data using an AI-guided interface that validates details and reduces errors. The expert-assisted plan is suitable for those dealing with complex income, GST transitions, or compliance changes, where a qualified professional reviews documents, handles filings, and ensures regulatory accuracy.
Q2. Which is the best site to file ITR?
The best site to file an income tax return depends on the level of guidance required. The Income Tax Department’s e-filing portal is the official platform and is suitable for taxpayers familiar with return filing procedures. However, many taxpayers prefer platforms like TaxBuddy that provide guided workflows, automated data checks, and professional support, making the filing process simpler and less error-prone.
Q3. Where to file an income tax return?
An income tax return can be filed directly on the official Income Tax Department e-filing portal. Alternatively, authorized private platforms such as TaxBuddy can be used for filing. These platforms integrate the filing process with document validation, error checks, and optional expert assistance, which can be especially helpful for business owners and GST-registered taxpayers.
Q4. What form is required to exit the GST composition scheme?
To exit the GST composition scheme, Form GST CMP-04 must be filed on the GST portal. This form serves as an official intimation of withdrawal from the scheme. It must be filed within the prescribed timeline from the date the dealer becomes ineligible or chooses to opt out. Filing CMP-04 is mandatory to legally transition to the regular GST scheme.
Q5. Is exit from the composition scheme mandatory after crossing ₹1.5 crore turnover?
Yes, exit from the composition scheme becomes mandatory once turnover exceeds ₹1.5 crore on a pan-India basis. The threshold is lower for certain special category states. Continuing under the composition scheme after crossing the limit is treated as non-compliance and may attract tax demands, interest, and penalties under the GST law.
Q6. From which date does regular GST apply after crossing the limit?
Regular GST provisions apply from the exact date on which the turnover crosses the prescribed threshold, not from the next financial year. From that date onward, the taxpayer must follow all regular GST compliance requirements, including issuing tax invoices, charging GST at applicable rates, and filing regular returns.
Q7. Can input tax credit be claimed after switching to regular GST?
Input tax credit can be claimed on eligible inputs, semi-finished goods, and finished goods held in stock on the date of transition to regular GST. The claim is subject to conditions such as the availability of valid tax invoices and adherence to prescribed timelines. Input tax credit cannot be claimed for purchases made during the composition scheme period.
Q8. Which returns apply after moving to the regular GST scheme?
After switching to the regular GST scheme, the taxpayer is required to file GSTR-1 for reporting outward supplies and GSTR-3B for monthly tax payment and summary reporting. These returns replace the simplified filings applicable under the composition scheme and require more detailed disclosure of transactions.
Q9. Are tax invoices mandatory after exiting the composition scheme?
Yes, issuing tax invoices becomes mandatory once the dealer exits the composition scheme. Bills of supply are no longer valid under the regular GST scheme. Tax invoices must clearly show the applicable GST rate, tax amount, and other prescribed details, ensuring transparency and eligibility for input tax credit for customers.
Q10. Do bank details need updating during GST transition?
Bank details linked to the GST registration must be accurate and verified, especially after transitioning to regular GST. Updated bank details are essential for processing refunds and maintaining compliance. The GST portal allows the addition or modification of bank accounts through non-core amendments, subject to the submission of required documents.
Q11. What happens if the turnover limit is crossed mid-year?
If the turnover limit is crossed at any point during the financial year, the dealer must immediately exit the composition scheme from that date. Regular GST compliance applies from the same day, and all subsequent transactions must follow regular GST rules. Delaying the switch can result in compliance issues and financial penalties.
Q12. Does TaxBuddy help with ongoing GST compliance after transition?
TaxBuddy provides ongoing GST compliance support even after the transition to regular GST. This includes assistance with return filing, reminders for due dates, guidance on regulatory changes, and access to expert support when complexities arise. Continuous monitoring helps businesses remain compliant while focusing on growth rather than administrative burden.
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