Composition Scheme Ends the Day You Cross Rs. 1.5 Crore — But the Extra Tax Is Computed Cum-Tax: GSTAT

The Hyderabad bench of the GST Appellate Tribunal has held that the composition option lapses the day aggregate turnover crosses Rs. 1.5 crore, but that the differential tax must then be computed cum-tax under Rule 35 rather than on the gross invoice value.

The GST Appellate Tribunal has handed composition dealers who outgrow the scheme a useful piece of relief. In Sri Parameshwara Bricks v. State Tax Officer, decided by the Hyderabad bench on 20 August 2026 and reported on 24 August, the Tribunal confirmed the hard part of the law and then softened the arithmetic.

The hard part first. Under Section 10(3), the composition option lapses on the day aggregate turnover crosses the Rs. 1.5 crore limit. It is not a year-end adjustment, and it does not wait for the department to notice. From that day the dealer is an ordinary taxpayer at ordinary rates.

The softening lies in how the differential tax is then worked out. A composition dealer cannot collect GST from his customers — that is the scheme's bargain — so his invoice amounts are already tax-inclusive, not price-plus-tax. The Tribunal held the demand must be computed under Rule 35 of the CGST Rules, treating the invoice value as cum-tax: tax equals the tax-inclusive value multiplied by the rate, divided by 100 plus the rate. CBIC's own valuation flyer sets out that formula: https://www.gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/Valution_in_GST_new.pdf

What this means for you: watch turnover monthly, not annually, and file CMP-04 within seven days of crossing. If a demand has already been raised on your gross invoice value, ask for the Rule 35 computation. This is the Hyderabad bench, not Chennai, but both sit under the same GSTAT (Procedure) Rules, 2025. CBIC's composition flyer: https://www.gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/composition-levy-scheme.pdf

Topics:composition schemeGSTATRule 35cum taxSection 10(3)aggregate turnoverCMP-04differential taxcomposition dealerChennaiTamil NaduGST appeal

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