Complete guide to the Composition Scheme under Section 10 of CGST Act — eligibility, rates (1%/5%/6%), restrictions, filing requirements, and when to opt in or stay with regular registration.
GST rates were revised in September 2025, and the rates on this page have not yet been checked by a tax professional against that revision. Confirm the current rate in the CBIC rate notifications before you invoice.
| Feature | Composition | Regular |
|---|---|---|
| Turnover Limit | ₹1.5 Cr | No limit |
| Tax Rate | 1-6% (on turnover) | 5-28% (on value) |
| Input Tax Credit | Not available | Fully available |
| Invoice Type | Bill of Supply | Tax Invoice |
| Inter-State Supply | Not allowed (outward) | Allowed |
| E-Commerce Sales | Not allowed | Allowed |
| Return Filing | Quarterly + Annual | Monthly + Annual |
| Collect GST from Buyer | Cannot collect | Must collect |
Eligibility under Section 10 of CGST Act: (1) Aggregate turnover ≤ ₹1.5 Crore in preceding FY (₹75 Lakh for NE/hill states: Arunachal, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand); (2) Must be dealing in goods OR providing restaurant/outdoor catering services; (3) NOT eligible: Ice cream manufacturers, pan masala/tobacco dealers, casual taxable persons, non-resident taxable persons, inter-state suppliers, e-commerce operators, persons making exempt supply of alcohol. Post-2019 amendment: Pure service providers with turnover ≤ ₹50 Lakh can also opt for composition (at 6% rate).
Rates vary by business type: (1) Manufacturers & traders: 1% of turnover (0.5% CGST + 0.5% SGST); (2) Restaurants/outdoor catering: 5% of turnover (2.5% CGST + 2.5% SGST); (3) Service providers (Section 10(2A)): 6% of turnover (3% CGST + 3% SGST) — added via 32nd Council Meeting; Important: Tax is calculated on TOTAL turnover (not just taxable turnover). This means exempt supplies are included in the base. No separate IGST applies — all supplies treated as intra-state regardless of buyer location.
No. This is the biggest trade-off of the composition scheme. (1) Cannot claim ITC on any purchase (goods, services, capital goods); (2) Cannot pass on credit to buyers (buyers of composition dealer cannot claim ITC); (3) On exit from scheme: Can claim ITC on stock held as on date of transition to regular (file ITC-01); (4) On entry to scheme: Must reverse ITC on stock held as on transition date (file ITC-03); (5) Practical impact: Best for businesses with low input costs (services, trading) or where customers are end-consumers (don't need ITC). Bad for businesses with heavy capital investment or B2B customers who need tax invoices.
Simplified filing schedule: (1) CMP-08: Quarterly self-assessed tax statement — due by 18th of month following quarter (e.g., Q1 Apr-Jun due by 18th July). Contains turnover + tax calculation only; (2) GSTR-4: Annual return — due by 30th April of following FY. Contains full year summary, tax paid, amendments; (3) No GSTR-1 (outward supply details) required; (4) No GSTR-3B (monthly summary) required; (5) Total: 5 filings per year (4 quarterly CMP-08 + 1 annual GSTR-4) vs 25+ filings for regular dealers (12 GSTR-1 + 12 GSTR-3B + 1 GSTR-9).
Avoid composition scheme if: (1) Your customers are GST-registered businesses who need tax invoices to claim ITC — they'll avoid buying from you; (2) You have significant inter-state sales (not allowed); (3) You sell on Amazon/Flipkart (e-commerce supply not permitted); (4) You have large capital expenditure (can't claim ITC on machinery, office, vehicles); (5) Your input tax cost exceeds the composition benefit (e.g., if you buy goods at 18% and sell at 1% composition — you lose the 18% ITC); (6) Your turnover is growing fast and will cross ₹1.5 Cr — switching mid-year is disruptive; (7) You export goods (exports attract 0% GST with ITC refund — much more beneficial).
Whether composition or regular — our platform handles CMP-08, GSTR-4, and annual returns with auto-calculation.
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