GST Composition Scheme — Rates, Limit & Eligibility 2026

Updated: 3 June 2026 | CGST Act | CMP-08 Quarterly | GSTR-4 Annual

GST Composition Scheme allows small businesses with turnover up to ₹1.5 crore to pay a flat tax: 1% for traders/manufacturers, 5% for restaurants, 6% for service providers. No monthly GSTR-1/3B — only quarterly CMP-08 and annual GSTR-4. Cannot issue tax invoice or collect GST from customers. Buyers cannot claim ITC on purchases from composition dealers.

₹1.5 Cr

Turnover limit for GST Composition Scheme (₹75 lakh for special category states).
Service providers (non-restaurant) can opt under ₹50 lakh. Tax is on total turnover — not profit.

Composition Scheme Rates — At a Glance

Type of Dealer	Turnover Limit	GST Rate	CGST	SGST
Manufacturers & Traders	₹1.5 crore	1%	0.5%	0.5%
Restaurants (no alcohol)	₹1.5 crore	5%	2.5%	2.5%
Service Providers (mixed/pure)	₹50 lakh	6%	3%	3%
Special Category States (NE + hills)	₹75 lakh	1% / 5%	0.5%/2.5%	0.5%/2.5%

Note: Tax is computed on aggregate turnover — including exempt supplies and goods on which you're a reverse charge recipient. No ITC allowed under composition.

Composition Scheme — Pros & Cons

Advantages

Very low tax rate (1–6%)
Minimal compliance — no GSTR-1/3B
Quarterly payment instead of monthly
No invoice-level reporting in returns
Suitable for B2C businesses

Disadvantages

No ITC on purchases
Buyers can't claim ITC on your invoices
Cannot supply goods inter-state
Cannot issue GST tax invoice
Not suitable for B2B businesses

Who Cannot Use Composition Scheme?

Suppliers making inter-state outward supplies
Casual taxable persons / Non-resident taxable persons
Suppliers of notified goods: ice cream, pan masala, tobacco products, aerated beverages
Businesses supplying goods through e-commerce operators (Flipkart, Amazon, etc.)
Businesses already registered as regular GST taxpayers (until opting in at start of FY)

Returns Under Composition Scheme

Return / Form	Frequency	Due Date	Purpose
CMP-08	Quarterly	18th of month after quarter (Jul 18, Oct 18, Jan 18, Apr 18)	Self-assessed tax payment statement
GSTR-4	Annual	30 April of following year	Annual return — turnover and tax summary
GSTR-9A	Annual (if notified)	31 December	Annual reconciliation (currently exempt for small dealers)

Frequently Asked Questions

Who can opt for GST Composition Scheme?

Composition scheme is available for: (1) Manufacturers and traders with aggregate turnover up to ₹1.5 crore (₹75 lakh for special category states); (2) Restaurants (not serving alcohol) up to ₹1.5 crore; (3) Service providers up to ₹50 lakh (CGST amendment). Persons not eligible: inter-state suppliers, e-commerce operators, manufacturers of notified goods (ice cream, tobacco, etc.), casual taxable persons.

What is the GST rate for composition dealers?

Composition dealer GST rates: Manufacturers/traders: 1% (0.5% CGST + 0.5% SGST) on turnover. Restaurants: 5% (2.5% CGST + 2.5% SGST) on turnover. Service providers (CGST amendment — GSTR-4 filers): 6% (3% CGST + 3% SGST) on turnover. Tax is on total turnover — not on taxable supplies only.

Can a composition dealer issue a tax invoice?

No. A composition dealer cannot issue a GST tax invoice. Instead, they issue a Bill of Supply. They also cannot charge GST to customers or collect it separately. A composition dealer's buyers cannot claim ITC on purchases from them — this is a major consideration for B2B businesses.

What returns does a composition dealer file?

Composition dealers file: CMP-08 (quarterly statement of tax — by 18th of month after quarter end) and GSTR-4 (annual return — by 30 April of following year). They do not file GSTR-1 or GSTR-3B monthly returns. Composition dealers must also pay tax on RCM (reverse charge) supplies.

How to opt in or opt out of the Composition Scheme?

Opt in: File GST CMP-02 on the GST portal at the beginning of the financial year (or at time of new registration). Opt out: File GST CMP-04 if turnover crosses ₹1.5 crore or if you want to switch to regular GST. After opting out, you must file GSTR-1 and GSTR-3B going forward, and you can claim ITC on stock held on the day of switching.

GST Registration GST Return Due Dates GST Turnover Limit Input Tax Credit GST Late Fee E-Invoicing GST

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