FORM GST ITC-03 - Stock-credit reversal on entry into composition
A section 18(4) event requires invoice-based input reversal and pro-rata remaining-life capital reversal.
Responsible actor: The registered person entering composition declares and pays the stock/capital reversal. Provision: Section 18(4); rules 3(3), 44(1)–(5).
Official source and completed example
Download official blank source extract PDF Download completed fictional sample PDF
The sample is a flowed model of the prescribed fields and selected paragraphs, not an official issued PDF. Names, references and facts are fictional. It contains no signature, stamp, DSC or simulated approval.
Current section 18/25/143 and CGST rules 40, 41, 41A, 44 and 45 checked 21 October 2026; source structure from official 1 January 2022 Part B, read with the current operative rule.
Worked facts and completed entries
This independent branch enters composition from 1 April 2026 after CMP-02 on 20 March. On 31 March it holds inputs worth INR 50,000, WIP inputs worth INR 20,000 and a machine acquired 1 April 2025 for INR 1,00,000 with CGST/SGST INR 9,000 each. The machine has 48 of 60 months remaining, so INR 7,200 per head is reversed for it. Inputs add INR 6,300 per head: total reversal INR 13,500 each, INR 27,000 combined, paid from eligible credit on 20 May. Opening credit was INR 15,000 each; the remaining INR 1,500 each lapses after section 18(4) payment.
1–4. Event and identity
| 1. GSTIN | 29AABCA0000A1ZT |
|---|---|
| 2. Legal name | Aster Learning Supplies Private Limited (fictional) |
| 3. Trade name | Aster Learning Shop (fictional) |
| 4(a). Composition ARN / date | ILLUSTRATION-CMP02-2026-01 / 20 March 2026 |
| Composition effective | 1 April 2026 |
| 4(b). Exemption effective date | Not applicable — composition entry, not a new exemption |
| Stock cut-off | 31 March 2026 |
| Filing/payment | 20 May 2026; within the sixty-day rule 3(3) period |
5(a)–(c). Invoice-supported stock and capital reversal
| Class / Sr | Supplier / invoice / date | Description / UQC / quantity | Adjusted value INR | CGST / SGST reversal INR | UT / IGST / Cess INR |
|---|---|---|---|---|---|
| 5(a) / 1 | 29AABCV0000A1Z8 / VED-INP-2026-0201 / 1 February 2026 | Input kits / NOS / 100 | 50000 | 4500 / 4500 | 0 / 0 / 0 |
| 5(b) / 2 | 29AABCV0000A1Z8 / VED-WIP-2026-0202 / 2 February 2026 | Inputs in twenty WIP units / NOS / 20 | 20000 | 1800 / 1800 | 0 / 0 / 0 |
| 5(c) / 3 | 29AABCV0000A1Z8 / VED-CAP-2025-0401 / 1 April 2025 | Eligible machine, 12 full months used / NOS / 1 | 80000 = 100000 × 48/60 | 7200 / 7200 = 9000 each × 48/60 | 0 / 0 / 0 |
5(d)–(e). Missing-invoice categories
| 5(d). Inputs / WIP without invoices | Nil — every selected item has its invoice |
|---|---|
| 5(e). Capital without invoices | Nil — machine invoice is available |
| Market-value estimation / accountant certification | Not applicable: rule 44(3)/(5) missing-invoice estimate is not used |
6. Payable and paid by ledger
| Tax head | Payable INR | Cash paid / entry | Credit paid / entry | UT / IGST / Cess cross-payment |
|---|---|---|---|---|
| Central Tax | 13500 | 0 / not used | 13500 / ILLUSTRATION-ITC03-CGST-2026 | 0 |
| State Tax | 13500 | 0 / not used | 13500 / ILLUSTRATION-ITC03-SGST-2026 | 0 |
| UT Tax | 0 | 0 / not used | 0 / not used | 0 |
| Integrated Tax | 0 | 0 / not used | 0 / not used | 0 |
| Cess | 0 | 0 / not used | 0 / not used | 0 |
Remaining-life and lapse reconciliation
Capital reversal per head is INR 9,000 × 48/60 = INR 7,200; the five-percentage-points-per-quarter claim reduction in rule 40 is not used. Total per head = 4,500 + 1,800 + 7,200 = INR 13,500. Eligible credit INR 15,000 less payment INR 13,500 leaves INR 1,500 per head; that residue lapses under the section 18(4) proviso, rather than remaining available for composition-period purchases.
Verification and execution
I, Meera Rao, director of the fictional applicant, solemnly affirm that the information in this educational scenario is true to its stated assumed facts and nothing has been concealed. Place: Bengaluru. Date: 20 May 2026. Signatory name/status: Meera Rao, authorised director (fictional; unsigned). Signature: not executed. No DSC, signature, seal or official approval is reproduced.
How this form moves the matter forward
- Take the stock/capital snapshot immediately before composition or exemption takes effect.
- Calculate invoice-proportionate input tax and capital tax attributable to remaining useful life out of sixty months; use the prescribed certification for missing-invoice estimates.
- Declare the section 18(4) liability in ITC-03, pay under the permitted ledger route and apply the statutory lapse of residual credit. Cancellation uses GSTR-10, not this declaration.
Evidence supporting these entries
- CMP-02 and effective-date record
- Stock/WIP invoice allocation and capital-age schedule
- Eligible-credit debit references, reversal and residual-lapse reconciliation
Period and legal consequences
The model uses an exact twelve-month capital age so no partial-month assumption is hidden. Rule 44’s five-year remaining-life method is different from rule 40’s quarterly reduction when claiming credit after leaving composition. Section 18(4) payment may use eligible credit or cash; the example has sufficient eligible credit.
Primary source and exact locator
Official notified form source: PDF pages 98-100; printed pages 92-94.
CGST Act and government-hosted Act and Rules compilation - Section 18(4); rules 3(3), 44(1)–(5). Source and example revision: 21 October 2026.
Questions answered by this example
Who prepares or issues this form?
The registered person entering composition declares and pays the stock/capital reversal. A section 18(4) event requires invoice-based input reversal and pro-rata remaining-life capital reversal.
Can this sample be filed or treated as an issued document?
No. It is a completed fictional teaching example. Use the notified form and the authenticated portal/proceeding record for an actual matter. The example contains no executed signature or official approval.
What must reconcile before the next step?
CMP-02 and effective-date record; Stock/WIP invoice allocation and capital-age schedule; Eligible-credit debit references, reversal and residual-lapse reconciliation.