The GST Composition Scheme lets a small business pay a flat tax on turnover instead of the regular GST regime: 1% for traders and manufacturers, 5% for restaurants and 6% for other service providers. The turnover limit is Rs1.5 crore for goods (Rs75 lakh in special-category states) and Rs50 lakh for services. You file quarterly CMP-08 and annual GSTR-4, but cannot charge GST on your bill, issue a tax invoice or claim Input Tax Credit.
Composition Scheme Rates & Limits
Tax is charged on total turnover in the state, not on profit and not only on taxable supplies. The rate splits equally into CGST and SGST.
| Type of dealer | Turnover limit | GST rate | CGST + SGST | ITC |
|---|---|---|---|---|
| Traders & manufacturers | Rs1.5 crore | 1% | 0.5% + 0.5% | No |
| Restaurants (no alcohol) | Rs1.5 crore | 5% | 2.5% + 2.5% | No |
| Other service providers | Rs50 lakh | 6% | 3% + 3% | No |
| Special-category states (goods) | Rs75 lakh | 1% / 5% | As above | No |
Rate is on aggregate turnover. GST 2.0 (eff 22 Sep 2025) restructured regular slabs but did not change composition rates or limits. Confirm on gst.gov.in before opting.
A composition dealer cannot collect GST from customers and cannot issue a tax invoice — only a Bill of Supply. The 1–6% is paid from your margin. It also means your B2B buyers get no ITC on purchases from you, so the scheme suits B2C and local trade, not businesses selling to other GST-registered firms.
Eligibility — Who Can and Cannot Opt
Any registered person whose aggregate turnover in the preceding financial year was within the limit may opt, provided they are not in an excluded category. GST registration is a prerequisite.
- Traders & manufacturers up to Rs1.5 crore
- Restaurants not serving alcohol up to Rs1.5 crore
- Service providers up to Rs50 lakh
- Businesses within a single state (intra-state only)
- Mainly B2C / local walk-in customers
- Small dealers who value simple quarterly filing
The scheme is barred for the following, however small the turnover:
- Suppliers making inter-state outward supplies
- Businesses supplying goods or services through an e-commerce operator (Amazon, Flipkart, etc.) that collects TCS
- Manufacturers of notified goods — ice cream, pan masala, tobacco, aerated water, fly-ash bricks
- Casual taxable persons and non-resident taxable persons
- Suppliers of non-taxable / exempt goods outside the scheme scope
Not sure if your business qualifies for composition?
Check My Eligibility →Returns a Composition Dealer Files
Composition dealers skip the monthly GSTR-1 and GSTR-3B cycle. Instead they pay quarterly and file one annual return.
- 1Pay quarterlyCMP-08 self-assessed tax
- 2File annualGSTR-4 by 30 June
- 3Bill of SupplyNo tax invoice, no GST collected
- 4RCMPay tax on reverse-charge inward supplies
| 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 June of the following FY | Annual return — turnover & tax summary |
| CMP-02 | On opting in | Before 31 March of preceding FY | Intimation to opt into the scheme |
| CMP-04 | On opting out | Within 7 days of becoming ineligible | Intimation to withdraw / on crossing limit |
GSTR-4 annual due date moved from 30 April to 30 June from FY 2024-25 (Notification 12/2024-CT, 10 Jul 2024). Late fee Rs50/day (Rs20/day nil), plus 18% interest under Section 50.
Being in composition does not exempt you from reverse charge. On specified inward supplies (e.g. from an unregistered supplier where notified, or GTA freight), a composition dealer must pay GST at the normal rate under RCM — over and above the 1–6% on turnover — and cannot claim it as credit.
Should You Opt for Composition?
✓Consider it if
- Turnover is small and mostly B2C / local walk-in
- You want simple quarterly filing instead of monthly
- You don’t rely on input-tax credit
- Your customers don’t need ITC on your invoices
- You supply only within your own state
!Be careful if
- You sell B2B and buyers expect ITC
- You make inter-state supplies
- You sell through Amazon / Flipkart / other TCS e-commerce
- You have large input GST you could otherwise credit
- You are near the turnover ceiling
How to Opt In or Opt Out
- Opt in: file CMP-02 on the GST portal before 31 March of the preceding financial year (or at the time of new registration). The scheme applies for the whole year.
- Opt out: file CMP-04 if turnover crosses the limit or you choose to move to the regular scheme; you then file GSTR-1 and GSTR-3B and can claim ITC on stock held on the switch date via ITC-01.
- Auto exit: crossing the turnover limit makes you ineligible from that day — regular-scheme rules apply immediately.
Want us to file your CMP-02 / CMP-08 and keep you compliant?
Talk to a GST Expert →- Composition scheme: Section 10, CGST Act 2017 & Rule 7 CGST Rules
- Rates & forms: gst.gov.in
- CBIC: cbic-gst.gov.in
- GSTR-4 due date: Notification 12/2024-CT (10 Jul 2024)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.