A simplified GST scheme for small taxpayers with turnover up to ₹1.5 crore, allowing them to pay a flat percentage of turnover as tax instead of regular GST rates.
The Composition Scheme under GST is designed to reduce compliance burden for small businesses. Instead of filing monthly returns and charging GST on each invoice, composition taxpayers pay a flat rate on their total turnover: 1% for manufacturers, 1% for traders, 5% for restaurants, and 6% for service providers (up to ₹50 lakh turnover). Composition taxpayers cannot collect GST from customers (no tax on invoices), cannot claim input tax credit, and cannot make inter-state supplies. They file a single quarterly return (CMP-08) instead of monthly GSTR-1 and GSTR-3B.
A small manufacturer with ₹80,00,000 annual turnover under Composition Scheme pays 1% = ₹80,000 as total GST for the year. Under regular GST (18%), they'd collect and remit much more but could claim ITC.
glossaryTermPage.reasons.accuracy
glossaryTermPage.reasons.compliance
glossaryTermPage.reasons.decisions
glossaryTermPage.reasons.efficiency
Businesses with aggregate turnover up to ₹1.5 crore (₹75 lakh for special category states). Service providers up to ₹50 lakh can opt in at 6% rate. E-commerce operators, inter-state sellers, and manufacturers of specific notified goods are NOT eligible.
No. Composition taxpayers cannot claim ITC on purchases. This means if you buy ₹10,00,000 worth of goods with 18% GST (₹1,80,000), you absorb that entire GST cost. This makes the scheme unsuitable for businesses with high-value purchases.
A comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple earlier taxes like VAT, excise duty, and service tax.
The GST paid on business purchases that can be claimed as a credit against the GST collected on sales, reducing the net tax payable.
Harmonized System of Nomenclature — an internationally standardized system of names and numbers to classify traded products, used in GST for goods classification.
A standardized electronic invoicing system under GST in India where invoices are authenticated by the Invoice Registration Portal (IRP) before being issued.
glossaryTermPage.cta.subtitle