Section 10(2)(a) to (f): The Six Gates a Composition Dealer Must Clear

Section 10 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.

Section 10(1) says who may opt. Section 10(2) says who is eligible to opt — and the two are not the same test. Six clauses, each with its own amendment history, and failing any one of them ends the scheme.

A registered person is eligible under s.10(1) only if: (a) save as permitted by the second proviso, he is not engaged in the supply of services; (b) he makes no supply of goods or services not leviable to tax; (c) he makes no inter-State outward supplies of goods or services; (d) he makes no supply of services through an e-commerce operator liable to collect TCS under s.52; (e) he is not a manufacturer of notified goods; and (f) he is neither a casual taxable person nor a non-resident taxable person. A proviso then requires every registration on the PAN to opt together.

Clause (a): not engaged in the supply of services

The clause as it now stands reads: "save as provided in sub-section (1), he is not engaged in the supply of services".

The words "save as provided in sub-section (1)" carry the whole of the second proviso into the eligibility test. So the bar is not absolute — services within 10% of preceding-year State turnover or ₹5 lakh, whichever is higher, do not offend clause (a).

And the clause was substituted with effect from 01.02.2019. Before that it read "he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II" — the restaurant carve-out was the only permitted service. The substitution replaced a single named exception with a quantified tolerance. The 10% service allowance →

Clause (b): nothing that is not leviable to tax

"he is not engaged in making any supply of goods or services which are not leviable to tax under this Act"

The words "or services" were inserted by the Finance Act, 2020, notified through Notification No. 92/2020-CT with effect from 01.01.2021. Until then the bar reached only non-leviable goods.

The non-leviable list is short and specific — the supplies outside the charge under s.9(1) and (2):

• petroleum crude
• high speed diesel
• motor spirit (petrol)
• natural gas
• aviation turbine fuel
• alcoholic liquor for human consumption

A petrol pump is therefore out of composition altogether, and so is a retailer who sells a little diesel alongside otherwise eligible goods. There is no de minimis in clause (b).

Non-leviable is not the same as exempt or nil-rated. An exempt supply is within the charge and then relieved; a non-leviable supply is outside the charge. A dealer in exempt goods is not disqualified by clause (b).

Clause (c): no inter-State outward supplies

"he is not engaged in making any inter-State outward supplies of goods or services"

"Or services" was inserted here too, from 01.01.2021.

Three readings that decide most cases. The bar is on outward supplies — inter-State purchases are entirely permitted, and are in fact the normal position for a composition trader. It covers exempt as well as taxable outward supplies, because the clause is not qualified. And an export, a supply to an SEZ and a deemed export are all inter-State supplies under s.7 of the IGST Act, so each is fatal.

A stock transfer to the person's own branch in another State is also an inter-State outward supply — distinct persons under s.25(4), Schedule I entry 2 — which is one more reason the PAN-wide election exists.

Clause (d): services through an e-commerce operator

"he is not engaged in making any supply of services through an electronic commerce operator who is required to collect tax at source under section 52"

The word "goods" was omitted by the Finance Act, 2023, notified through Notification No. 28/2023-CT with effect from 01.10.2023. Before that the clause read "any supply of goods or services", and a seller on any TCS-collecting marketplace was disqualified outright.

After 01.10.2023 the position splits. A composition dealer may sell goods through an e-commerce operator that collects TCS. A composition dealer may not supply services through one.

So a small trader listing products on a marketplace is now eligible, subject to the other conditions; a tutor or a beautician taking bookings through a TCS-collecting platform is not. And the bar runs one way — the ICAI Handbook notes that the person who is the e-commerce operator is a separate question from the person who supplies through one. Section 52 TCS →

Clause (e): manufacturer of notified goods

"he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council"

The notified list — Notification No. 14/2019-CT, as amended by 43/2019-CT, 4/2022-CT and 16/2022-CT — now covers ice cream and other edible ice, pan masala, tobacco and manufactured tobacco substitutes, aerated water, fly ash bricks, blocks and aggregate, bricks of fossil meals or similar siliceous earths, building bricks, and earthen or roofing tiles. The manufacturer bar →

The bar is on manufacture, not on trade. A shop that sells ice cream it did not make is not caught by clause (e).

Clause (f): neither casual nor non-resident

"he is neither a casual taxable person nor a non-resident taxable person"

Inserted by the Finance (No. 2) Act, 2019 through Notification No. 1/2020-CT with effect from 01.01.2020 — it moved into the section a condition that had lived only in Rule 5(1)(a) since 2017. Rule 5(1)(a) still carries it, so it now appears in both places.

The logic is structural. A casual taxable person under s.2(20) and a non-resident taxable person under s.2(77) both register for a period not exceeding ninety days and pay advance tax under s.27(2) estimated on their liability. That mechanism cannot be reconciled with a turnover-based composition sum settled quarterly.

The proviso across all six

"Provided that where more than one registered persons are having the same Permanent Account Number… the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section."

Composition is an election of the PAN, not of the GSTIN. If any one registration is ineligible — say a Delhi branch that exports — the whole PAN is out of the goods composition scheme. Section 10(2A) carries the identical proviso for the service scheme.

Key takeaways

• Clause (a)'s bar on services is subject to the second proviso, so a 10% / ₹5 lakh tolerance applies.
• Clause (b) reaches non-leviable supplies — the five petroleum products and alcoholic liquor — with no de minimis; "or services" applies from 01.01.2021.
• Clause (c) bars outward inter-State supplies including exports, SEZ supplies and branch transfers; inter-State purchases are fine.
• Clause (d) since 01.10.2023 bars only services through a TCS-collecting e-commerce operator — goods are permitted.
• Clause (e) bars manufacture of notified goods, not trade in them.
• The PAN-wide proviso means one ineligible registration disqualifies every registration on the PAN.

Read next

• Section 10(1) Clause by Clause
• The Second Proviso: 10% of Turnover or ₹5 Lakh of Services
• The Manufacturer Bar: Which Goods Knock You Out of Composition
• Rule 5: Seven Conditions and Restrictions

Disclaimer: Positions stated as on 5 September 2026, based on section 10(2) of the CGST Act, 2017 with its amendment footnotes as recorded in the ICAI Bare Law (12th edition, amended to 31 March 2026), and the ICAI Handbook on Composition Scheme under GST (February 2026, 3rd edition).