GST CMP-05: Show Cause Notice on Eligibility for the Composition Scheme
FORM GST CMP-05 is a show-cause notice asking why you should not be denied the benefit of the composition scheme under Section 10. Reply in FORM GST CMP-06 within fifteen days of service, showing that you met the eligibility conditions throughout the period. If the officer is not satisfied, an order in FORM GST CMP-07 denies the scheme, usually with retrospective effect.
What is this notice?
FORM GST CMP-05 is issued where the proper officer has reason to believe a composition taxpayer was not eligible for the scheme, or has ceased to be eligible. Because denial normally operates from the date eligibility was lost, the consequence is a recomputation of liability at ordinary rates for the whole intervening period — which is why the fifteen-day reply matters more than its length suggests.
Common reasons it is issued
- Aggregate turnover crossing the threshold for the scheme during the year
- Making inter-State outward supplies, which the scheme does not permit
- Supplying goods or services through an electronic commerce operator required to collect tax at source
- Dealing in goods outside the scheme, or supplying services beyond the permitted limit
- Being a casual taxable person or a non-resident taxable person
How to reply — step by step
- Fix the exact date eligibility is said to have been lost — the whole liability computation turns on that single date.
- Compute aggregate turnover on the statutory definition, which is PAN-based and all-India, and includes exempt supplies; taxpayers routinely compute it on the wrong base.
- Where eligibility genuinely lapsed, file FORM GST CMP-04 to move out of the scheme and quantify the differential yourself rather than leaving it to the officer.
- Answer in FORM GST CMP-06 within fifteen days, attaching the turnover working and the supporting returns.
- If denial is ordered in CMP-07, weigh an appeal under Section 107 against accepting and regularising, because the retrospective effect drives the exposure.
Draft your CMP-05 reply in minutes
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Draft my reply free →Frequently asked questions
How long do I have to reply to CMP-05?
Fifteen days from service of the notice, under Rule 6(4). The order denying the option is passed in FORM GST CMP-07.
Is composition denial always retrospective?
It generally runs from the date eligibility was lost rather than the date of the order, which is what produces a differential demand for the intervening period along with interest.
Can I claim input tax credit if the scheme is denied?
Where you are treated as a regular taxpayer for the period, credit for that period may be claimable subject to Section 16 conditions and the applicable time limits. Raise it in the reply rather than after the order.
Related notices
This page is general information, not legal advice. Every notice turns on its own facts — verify with a professional or draft a fact-checked reply on Yukti.