GST Composition Scheme — Turnover Limit, Rates & Eligibility
Updated: 3 June 2026 | CGST Act | Section 10 Composition Levy
GST Composition Scheme: small businesses can pay tax at a flat rate on turnover instead of regular GST. Limit: ₹1.5 crore for goods traders/manufacturers; ₹50 lakh for service providers. Rates: 1% for traders, 5% for restaurants, 6% for service providers. No ITC. Cannot make inter-state supplies. File CMP-08 quarterly + GSTR-4 annually.
₹1.5 Cr
Turnover limit for goods dealers — ₹50 lakh for service providers (special composition for services).
Tax paid from own pocket — cannot charge GST from customers. Issue Bill of Supply (not tax invoice). No ITC allowed.
Tax paid from own pocket — cannot charge GST from customers. Issue Bill of Supply (not tax invoice). No ITC allowed.
Composition Scheme — Rates and Limits by Category
| Business Type | Turnover Limit | GST Rate | ITC |
|---|---|---|---|
| Manufacturers (non-restricted goods) | ₹1.5 crore | 1% of turnover | No |
| Traders / Retailers (goods) | ₹1.5 crore | 1% of turnover | No |
| Restaurant services (no alcohol) | ₹1.5 crore | 5% of turnover | No |
| Service providers (non-restaurant) | ₹50 lakh | 6% of turnover | No |
| Mixed (goods + services ≤10% of turnover) | ₹1.5 crore | 1% of turnover | No |
| Special category states (goods) | ₹75 lakh | 1% of turnover | No |
Composition vs Regular Scheme — Comparison
| Feature | Composition Scheme | Regular GST Registration |
|---|---|---|
| Tax rate | 1–6% on turnover | 5%/12%/18%/28% on value |
| ITC available | No | Yes |
| GST charged to customer | No (Bill of Supply) | Yes (Tax Invoice) |
| Inter-state supply | Not allowed | Allowed |
| E-commerce supply | Not allowed (aggregator) | Allowed |
| Return filing | CMP-08 (quarterly) + GSTR-4 (annual) | GSTR-1 + GSTR-3B (monthly/quarterly) |
| Compliance burden | Low | Higher |
| Best suited for | Small local retailers, restaurants | Businesses with large ITC or inter-state |
Frequently Asked Questions
What is the GST Composition Scheme turnover limit?
GST Composition Scheme turnover limits: Regular businesses (goods): ₹1.5 crore per annum (aggregate turnover in preceding year). Special category states (Manipur, Mizoram, Nagaland, Tripura, Uttarakhand, Sikkim, Arunachal Pradesh, Meghalaya, Himachal Pradesh): ₹75 lakh. Service providers / mixed supply (goods+services): ₹50 lakh per annum (CGST Notification 2/2019 — Composition for services). Restaurant services only: ₹1.5 crore limit (not ₹50 lakh). Turnover includes: taxable + exempt + exports of all businesses under same PAN. Does NOT include: CGST, SGST, IGST, cess paid.
What are the GST rates under Composition Scheme?
Composition Scheme GST rates: Manufacturers: 1% (0.5% CGST + 0.5% SGST) of turnover. Traders (goods): 1% of turnover. Restaurant services (not serving alcohol): 5% of turnover. Mixed service providers (non-restaurant services): 6% of turnover (3% CGST + 3% SGST). Note: Composition tax is payable from own funds — cannot collect tax from customers. Composition dealers cannot show GST on invoices (called "Bill of Supply" not tax invoice). Cannot avail Input Tax Credit (ITC). Must file quarterly CMP-08 return and annual GSTR-4.
Who is NOT eligible for GST Composition Scheme?
Not eligible for Composition Scheme: (1) Suppliers making inter-state supplies (must use regular registration). (2) Suppliers of non-taxable goods (e.g., petroleum). (3) E-commerce operators / suppliers through e-commerce aggregators. (4) Manufacturers of ice cream, pan masala, tobacco products, aerated water. (5) Non-resident taxable persons. (6) Input Service Distributors (ISD). (7) Persons who supply goods not liable to tax. (8) Businesses registered under TCS/TDS provisions. Also: if ANY business under the same PAN opts for Composition Scheme — ALL businesses must opt for it.
Can a service provider opt for Composition Scheme?
Yes — since January 2019 (CGST Notification 2/2019), service providers can opt for a Special Composition Scheme with: Turnover limit: ₹50 lakh. Tax rate: 6% (3% CGST + 3% SGST) on turnover — higher than the 1% for goods dealers. Cannot supply goods (except restaurant/food services). Eligible: consultants, freelancers, IT service providers, repair shops, transport services, etc. File CMP-08 quarterly + GSTR-4 annually. Restriction: cannot issue tax invoices, cannot collect GST from customers, cannot claim ITC.
How does a Composition dealer file GST returns?
Composition Scheme return filing: (1) CMP-08 (Quarterly): Summary of outward supplies + self-assessed tax payment. Due: 18th of month following each quarter (Apr-Jun: July 18, Jul-Sep: Oct 18, Oct-Dec: Jan 18, Jan-Mar: Apr 30). (2) GSTR-4 (Annual): Annual return. Due: April 30 of next financial year. No monthly GSTR-1 or GSTR-3B filing. Late fee: ₹200/day (₹100 CGST + ₹100 SGST) for GSTR-4. ₹50/day for CMP-08 (NIL return ₹20/day). Composition dealers pay tax from own pocket — no customer billing of GST. Pay tax quarterly via challan PMT-06.
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