CMP-05 is issued under Rule 6(4), Section 10 CGST. This guide explains the legal basis, common grounds, procedural steps, and how GST Notice AI drafts your reply in under 60 seconds with relevant citations and defences.
Form GST CMP-05 is a show cause notice for denial of the composition levy under Rule 6(4) of the CGST Rules read with Section 10 of the CGST Act. The Proper Officer proposes to deny the benefit of composition scheme from a specified date, typically for contravention of conditions like turnover limit, ineligible supplies, or wrong category of supplier.
Legal Section
Rule 6(4), Section 10 CGST
Response Window
15 Days
Reply Deadline
15 Days for Reply
Risk Level
Medium-High — Switch to Regular
Reply Form
Form CMP-06
Issuing Authority
Proper Officer
Turnover Exceeded Limit
Aggregate turnover exceeded ₹1.5 crore (₹75 lakh for specified special-category states) during the financial year — Section 10(1) proviso.
Made Inter-State Outward Supply
Composition dealers cannot make inter-state outward supplies — Section 10(2)(c). Even a single inter-state supply disqualifies the taxpayer.
Supplied Through E-Commerce Operator
Section 10(2)(d) bars supply through an e-commerce operator required to collect TCS under Section 52 — a single such supply is disqualifying.
Supplied Ineligible Goods or Services
Composition dealers cannot supply goods listed in Section 10(1)(a) proviso (e.g., ice cream, pan masala, tobacco) or services beyond 10% of turnover / ₹5 lakh under Section 10(2A).
Failure to Pay Tax / File Returns
Non-payment of composition tax (CMP-08) or non-filing of GSTR-4 annual return for consecutive periods.
Download CMP-05 from the portal. Verify the period of alleged contravention and the specific ground invoked. Pull CMP-08 returns, GSTR-4 annual return, and sales register for the period.
If turnover crossed limit: compute the exact date of crossover. The composition benefit ends from the next day (Rule 6(4) proviso) and regular registration provisions apply from that date. Voluntarily file CMP-04 if not already done.
If inter-state supply or e-commerce supply: check if it was a one-off error or a pattern. Even one qualifying supply triggers switching. Draft CMP-06 with (a) acknowledgment, (b) date of switch, (c) undertaking to pay tax under regular provisions from that date.
Draft Form CMP-06 reply within 15 days — include reconciliation statement, turnover computation, confirmation of supply types, and CMP-08 / GSTR-4 filing status.
Attend personal hearing. If denial is confirmed in Form CMP-07, tax liability is re-computed at regular rates from the date of disqualification with interest. ITC becomes available on inputs held in stock on that date (Section 18(1)(c), Rule 40).
If aggrieved, appeal under Section 107 within 3 months. File regular returns (GSTR-1, GSTR-3B) from the disqualification date onwards without waiting for CMP-07.
Eligibility Audit
Pulls all supplies for the financial year, flags any inter-state, e-commerce, or ineligible-goods supplies, and identifies the first disqualifying transaction.
Regular-Regime Transition Kit
Computes tax payable at regular rates from the crossover date, available ITC on closing stock, and generates the journal entry for the switch.
CMP-06 Reply Drafting
Drafts CMP-06 with reconciliation, factual narrative, and relevant legal citations for the appropriate sub-clause of Section 10.
Upload your CMP-05 notice. AI drafts the reply, computes deadlines, and cites every applicable section and rule.
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