Rule 7 Rate Table explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 7 is four rows long. Most summaries reproduce the rate column and stop there. The interesting column is the other one — the description of what the rate is charged on, which is not the same across the four rows.
Rule 7 prescribes: 0.5% for manufacturers, 2.5% for persons making clause (b) of paragraph 6 of Schedule II supplies, 0.5% for any other supplier under s.10(1) and (2), and 3% for a person under s.10(2A). Rows 1, 2 and 4 are charged on turnover in the State or Union territory; row 3 alone is charged on the turnover of taxable supplies of goods and services. Each figure is the central tax — the State or Union territory levy mirrors it, so the real burden is 1%, 5%, 1% and 6%.
The table as it stands
The current table was substituted by Notification No. 50/2020-CT dated 24.06.2020 with effect from 01.04.2020, and the substitution added a new column (1A) naming the sub-section under which the levy is opted. That column exists because s.10(2A) had entered the statute from 01.01.2020 and the old three-row table had no place for it.
| Sl. | Sub-section | Category of registered person | Rate (central tax) | Base |
|---|---|---|---|---|
| 1 | s.10(1) and (2) | Manufacturers, other than manufacturers of notified goods | 0.5% | turnover in the State or Union territory |
| 2 | s.10(1) and (2) | Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II | 2.5% | turnover in the State or Union territory |
| 3 | s.10(1) and (2) | Any other supplier eligible under s.10(1) and (2) | 0.5% | turnover of taxable supplies of goods and services in the State or Union territory |
| 4 | s.10(2A) | Persons not eligible under s.10(1) and (2) but eligible under s.10(2A) | 3% | turnover of supplies of goods and services in the State or Union territory |
The base column, which is where the money is
Rows 1, 2 and 4 say "turnover". Row 3 says "turnover of taxable supplies".
So a trader — row 3 — pays 0.5% on taxable supplies only. Exempt sales of goods drop out of the base entirely.
A manufacturer — row 1 — has no such words. On the literal text, the manufacturer's base is turnover in the State, which by the s.2(112) definition of "turnover in State" includes exempt supplies. Two businesses at the same rate, on different bases, because of three words present in one row and absent in another.
Row 4 is drafted the same way as row 1. "Turnover of supplies of goods and services" — the word "of" was itself supplied by a corrigendum, G.S.R. 412(E) dated 25.06.2020, to Notification No. 50/2020-CT. It does not say "taxable", so a s.10(2A) taxpayer's exempt supplies appear to enter the 3% base.
Which is a genuinely important asymmetry for anyone with a mixed exempt and taxable book, and one reason a mixed supplier should model both rows before choosing a structure.
"Turnover in State", not "aggregate turnover"
Every row is charged on turnover in the State or Union territory — the s.2(112) expression. The eligibility gate in s.10(1) and s.10(2A) uses aggregate turnover under s.2(6), which is PAN-wide and all-India.
Explanation 2 to section 10 then trims the payment base specifically:
"For the purposes of determining the tax payable by a person under this section, the expression 'turnover in State or turnover in Union territory' shall not include the value of following supplies, namely — (i) supplies from the first day of April of a financial year up to the date when such person becomes liable for registration under this Act; and (ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount."
Note the mirror-image treatment of pre-registration turnover. Explanation 1 includes it for testing eligibility. Explanation 2 excludes it for computing tax payable. Same period, opposite direction, and both are deliberate. Aggregate turnover vs turnover in State →
And interest income is out of the payment base in every row, by Explanation 2(ii).
Rate ceilings against rates actually prescribed
| Category | Ceiling in the section | Rule 7 rate | Headroom |
|---|---|---|---|
| Manufacturer | 1% | 0.5% | 0.5% |
| Schedule II para 6(b) supplies | 2.5% | 2.5% | nil |
| Other suppliers | 0.5% | 0.5% | nil |
| s.10(2A) | 3% | 3% | nil |
Only the manufacturer's rate sits below its cap, and it has since Notification No. 3/2018-CT dated 23.01.2018 with effect from 01.01.2018, which cut it from one per cent to half. The Government could restore 1% for manufacturers by amending Rule 7 alone; every other rate would need the section amended first.
Reading row 2 correctly
Row 2 is habitually labelled "restaurants". It says "Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II" — the supply, by way of or as part of any service, of goods being food or any other article for human consumption or drink, for consideration.
So the row follows the activity. A caterer, a canteen contractor, a sweet shop with a seating area serving on the premises — each may fall within paragraph 6(b) on its facts, and none is described as a restaurant in the rule.
And row 2 carries the highest goods-scheme rate at 2.5% central, 5% in all. That is the same headline number as the GST 2.0 restaurant rate of 5% without input tax credit under the regular scheme, which is why a restaurant near the threshold gains compliance simplicity from composition rather than a rate advantage.
The rate is on turnover, so it is not a margin tax
A composition dealer pays on turnover, and takes no credit — s.10(4) forbids both collection of tax from the recipient and any credit of input tax. So the rate applies to the whole sale value, and the GST embedded in purchases is a cost.
The comparison against the regular scheme therefore turns on margin, not on rate. A trader on a 10% margin paying 1% of turnover is paying 10% of margin; the same trader on a 3% margin is paying a third of it. The 1% headline says nothing on its own.
And nothing collected means nothing passed on. A registered buyer gets no credit from a composition seller, which is why composition suits B2C books and sits badly in a B2B chain. Bill of supply for composition dealers →
Key takeaways
- The table was substituted by Notification No. 50/2020-CT from 01.04.2020, adding column (1A) for s.10(2A).
- Row 3 alone is charged on taxable supplies; rows 1, 2 and 4 are charged on turnover.
- All rates are central tax; the State or Union territory levy mirrors them, giving 1%, 5%, 1% and 6%.
- Explanation 1 includes pre-registration turnover for eligibility; Explanation 2 excludes it for tax payable.
- Interest and discount are out of the payment base in every row.
- Only the manufacturer rate sits below its statutory cap, at 0.5% against 1%.
Read next
- Section 10(1) Clause by Clause
- Aggregate Turnover vs Turnover in State
- Section 10(2A): The 3% Scheme for Service Providers
- Rule 62: CMP-08 by the 18th, GSTR-4 by 30 June
Disclaimer: Positions stated as on 5 September 2026, based on Rule 7 of the CGST Rules, 2017 as substituted by Notification No. 50/2020-CT dated 24.06.2020 with corrigendum G.S.R. 412(E) dated 25.06.2020, and Explanations 1 and 2 to section 10 of the CGST Act, 2017, as recorded in the ICAI Bare Law (12th edition, amended to 31 March 2026).
Key Facts About Rule 7 Rate Table
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What are the composition rates under Rule 7?
0.5% central tax for manufacturers, 2.5% for clause (b) of paragraph 6 of Schedule II supplies, 0.5% for other suppliers, and 3% under section 10(2A) — doubled once the State or Union territory levy is added.
Do exempt sales attract composition tax?
For a trader under row 3, no — the base is turnover of taxable supplies. For a manufacturer under row 1 and a section 10(2A) taxpayer under row 4, the rule does not use the word "taxable".
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Rule 7 Rate Table: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.