Running a small shop, trading business or local manufacturing unit? Regular GST means charging tax on every invoice, claiming input credit and filing returns every month. The GST Composition Scheme was created to make life simpler for small taxpayers — you pay a small fixed percentage of your turnover and file far fewer returns. In this guide, PUCHO Business Consult explains who can opt in, the tax rates, the returns you file and when the scheme is (and isn’t) a good idea.
What is the GST Composition Scheme?
The Composition Scheme (Section 10 of the CGST Act) is an optional, simplified way of paying GST. Instead of collecting GST from customers and adjusting input tax credit, a composition dealer pays tax at a flat rate on total turnover. Compliance is lighter: one quarterly payment statement and one annual return instead of monthly GSTR-1 and GSTR-3B.
Who is eligible? Turnover limits
| Type of business | Turnover limit (previous FY) |
|---|---|
| Manufacturers and traders (goods) | Up to ₹1.5 crore |
| Goods suppliers in special category states (NE states, Uttarakhand etc.) | Up to ₹75 lakh |
| Restaurants (not serving alcohol) | Up to ₹1.5 crore |
| Service providers / mixed suppliers (Section 10(2A)) | Up to ₹50 lakh |
Turnover is calculated on an all-India basis for all businesses registered under the same PAN.
Composition scheme tax rates
| Category | Total GST rate (CGST + SGST) |
|---|---|
| Manufacturers | 1% of turnover |
| Traders (on taxable supplies) | 1% of turnover |
| Restaurants (without alcohol) | 5% of turnover |
| Service providers / mixed suppliers | 6% of turnover |
Who cannot opt for the composition scheme?
- Businesses making inter-state outward supplies of goods
- Sellers supplying goods through e-commerce operators that collect TCS (for example Amazon, Flipkart, Meesho)
- Manufacturers of notified goods such as ice cream, pan masala and tobacco products
- Casual taxable persons and non-resident taxable persons
- Businesses supplying goods that are not taxable under GST (e.g. alcohol for human consumption)
Key conditions to remember
- You cannot collect GST from customers — issue a Bill of Supply, not a tax invoice
- You cannot claim input tax credit on purchases
- Write “Composition taxable person, not eligible to collect tax on supplies” on every bill
- Display “Composition Taxable Person” on your signboard at the place of business
- You must pay tax under reverse charge where applicable
Returns and due dates for composition dealers
| Form | What it is | Due date |
|---|---|---|
| CMP-08 | Quarterly statement-cum-challan to pay tax | 18th of the month after each quarter |
| GSTR-4 | Annual return | 30th June after the financial year |
| CMP-02 | Intimation to opt into the scheme | Before the start of the financial year (by 31st March) |
How to opt in — step by step
- New registration: choose “Composition” while applying for GST registration in Form REG-01.
- Existing taxpayer: log in to the GST portal → Services → Registration → Application to Opt for Composition Levy and file Form CMP-02 before the new financial year begins.
- File ITC-03 within 60 days to reverse input credit on stock held, if required.
- Start issuing Bills of Supply and pay tax quarterly through CMP-08.
Is the composition scheme right for you?
| Good fit if… | Not a good fit if… |
|---|---|
| You sell mainly to end consumers (B2C) | Most of your customers are GST-registered businesses who want ITC |
| Your margins are thin and purchases are mostly from unregistered suppliers | You buy heavily from registered suppliers and need input credit |
| You sell locally within one state | You sell across states or on marketplaces |
| You want minimum paperwork | You plan to cross ₹1.5 crore soon |
Many small retailers save time and money under the scheme, while B2B suppliers usually do better under regular GST. The right choice depends on your margins, customer type and growth plans — this is exactly what we work out for you in a free consultation.
How PUCHO Business Consult helps
- GST registration under the composition or regular scheme
- Filing CMP-02, CMP-08 and GSTR-4 on time — no late fees
- Comparing composition vs regular GST for your actual numbers
- Switching back to regular GST (Form CMP-04) when your business grows
Read more: GST Registration in India · GST Return Filing Made Simple
Not sure if the Composition Scheme suits your business?
Talk to PUCHO Business Consult. We will compare composition vs regular GST using your real numbers and handle registration and filings end-to-end.
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This article is for general information only. Rules, rates and fees can change — please speak to our team before you file.