Switching to Composition Scheme: Form CMP-02 & Form ITC-03 Reversal SOP
July 24, 20269 min readAkib Husain
Switching to Composition Scheme: Form CMP-02 & Form ITC-03 Reversal SOP
Step-by-step statutory SOP for businesses converting from regular GST registration to Composition Scheme, explaining stock valuation rules and Tally Prime journals.
Who is this for: GST Scheme Conversion
Quick Answer: What Are the ITC Reversal Rules When Opting for Composition?
File Form CMP-02 on the GST portal before March 31st to opt into the Composition Scheme. Then calculate and reverse ITC on all input stock, WIP, and capital goods (pro-rata 60-month useful life) by filing Form GST ITC-03 within 60 days via Electronic Credit or Cash Ledger.
- CMP-02 intimation deadline is March 31 of the preceding financial year.
- Form ITC-03 must be filed within 60 days of starting the composition fiscal year.
- Capital goods ITC is reversed pro-rata based on a 5-year (60-month) asset life.
- TrulyInvoice streamlines purchase ledger entry in Tally Prime before scheme cutoff.
1. Step-by-Step Composition Opt-In & Reversal Workflow
- File Form CMP-02: Submit intimation on GST portal before March 31st.
- Take Physical Stock Audit: Value inputs, semi-finished goods, and capital assets as of March 31st midnight.
- Calculate ITC Reversal Amount: Match purchase invoices for stock; use 5% per quarter reduction for capital assets.
- File Form GST ITC-03: Pay reversal amount via Credit/Cash ledger and submit within 60 days.
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Akib HusainExpert Reviewer
Founder & Chief Architect of TrulyInvoice
Last Verified: July 24, 2026
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