GSTAT Hyderabad on Composition Scheme Turnover Breach and Cum-Tax Valuation

Overview of the Decision

The Goods and Services Tax Appellate Tribunal, Hyderabad Bench, in Parameshwara Bricks Vs. State Tax Officer (GSTAT Hyderabad), decided Appeal Nos. APL/126/HYD/2026 and APL/26/HYD/2026 by a common order dated 17.08.2026.

The controversy centered on whether M/s. Parameswara Bricks, a composition dealer under Section 10(1) of the Telangana Goods and Services Tax Act, 2017 (TSGST Act), lost eligibility under the composition scheme upon crossing the prescribed aggregate turnover limit of ₹1.50 crore in the financial years 2020–21 and 2021–22, and how the consequent differential tax should be computed.

While the Tribunal confirmed that the composition option had indeed lapsed by operation of law once the threshold was breached, it extended the cum-tax benefit under Rule 35 of the CGST/TSGST Rules, 2017 for recomputation of tax, even though the assessee had not specifically claimed this relief.

Factual Background

Business activity and registration

  • The assessee, M/s. Parameswara Bricks, is engaged in the manufacture and supply of red clay bricks.
  • It was registered under Section 10(1) of the TSGST Act and had opted for the composition scheme.
  • Under the scheme, the assessee was liable to pay GST at 1% (composition rate) on its turnover on the impugned goods, both under the TSGST Act and the Central Goods and Services Tax Act, 2017 (CGST Act).

Applicable turnover ceiling under composition scheme

  • For the State of Telangana, the aggregate turnover cap for continuing under the composition levy during the relevant period was ₹1.50 crore.
  • Under the statutory scheme:
    • Once aggregate turnover during a financial year exceeds ₹1.50 crore, the composition option lapses under Section 10(3).
    • From that date, the assessee must discharge tax at regular rates under Section 9(1).

Audit, E-Way Bills and Detected Discrepancies

Audit exercise and data comparison

During audit, the jurisdictional authorities:

  • Examined e-way bills issued by the assessee; and
  • Compared the turnover reflected therein with the turnover declared in FORM GST CMP-08 for the composition tax periods.

As per Rule 138(1) of the Telangana Goods and Services Tax Rules, 2017, registered persons moving goods above specified value thresholds must generate e-way bills containing prescribed particulars.

Figures for FY 2020–21

For financial year 2020–21, the audit noted:

  • Turnover as per e-way bills: ₹1,95,53,800/-
  • Turnover declared in FORM GST CMP-08: ₹1,44,86,100/-

Based on this:

  • The Department alleged that the aggregate turnover had crossed the ₹1.50 crore limit.
  • A differential turnover of ₹50,67,700/- was said to have escaped tax at the applicable regular rate.

Relying on Section 10(3) of the TSGST Act, the audit concluded:

  • The assessee ceased to be entitled to composition levy once aggregate turnover exceeded ₹1.50 crore in the financial year.
  • Consequently, the turnover beyond the threshold had to be taxed at regular rates, not at the concessional 1% composition rate.

Accordingly, for FY 2020–21 and 2021–22, the audit proposed that:

  • Composition scheme benefit was not available during the period after the threshold was crossed.
  • Tax must be demanded on the turnover (as per e-way bills) exceeding ₹1.50 crore for FY 2020–21, and similarly on the relevant turnover for 2021–22.

Show Cause Notices, Adjudication and First Appeal

Show cause notices and initial rate of tax

  • Show-cause notices were issued proposing recovery of differential tax for both financial years.
  • Initially, the notices computed tax at 28% (14% CGST + 14% SGST), though the applicable rate on the impugned supplies was later found to be 5%.

Order of the adjudicating authority

After adjudication:

  • The proper officer:
    • Restricted the tax demand to the correct rate of 5%.
    • Proceeded under Section 73 of the TSGST Act.
    • Levied interest under Section 50(1).
    • Imposed a penalty of 10% of the tax under Section 73.

First Appellate Authority’s view