GST Composition Scheme: Eligibility, Tax Rates & How to Opt
Simplified GST taxation for small businesses with turnover up to ₹1.5 crore
- Turnover Limit: Rs 1.5 crore (Rs 75 lakh for special category states)
- Tax Rates: Traders/Manufacturers: 1%, Restaurants: 5%, Service providers: 6% of turnover
- Returns: Quarterly GSTR-4 (by 18th of next month), Annual CMP-08
- No ITC: Cannot claim Input Tax Credit on purchases
- No Interstate: Cannot sell to other states or on e-commerce platforms
What is Composition Scheme?
GST Composition Scheme is a simple tax scheme for small taxpayers with reduced compliance burden. Instead of paying regular GST, you pay a fixed percentage of turnover.
Eligibility Criteria
- Annual turnover up to ₹1.5 crore
- ₹75 lakh for special category states
- Should not be engaged in inter-state supply
- Should not supply non-taxable goods
- Not an e-commerce operator
Tax Rates Under Composition Scheme
composition_rates.ledger
| Business Type | GST Rate |
|---|---|
| Manufacturers | 1%(0.5% CGST + 0.5% SGST) |
| Traders | 1%(0.5% CGST + 0.5% SGST) |
| Restaurants (no alcohol) | 5%(2.5% CGST + 2.5% SGST) |
| Service Providers | 6%(3% CGST + 3% SGST) |
Benefits of Composition Scheme
Significant tax savings
1% vs 18% regular GST - save up to 17%!
Reduced filing burden
Quarterly returns instead of monthly filings
Minimal documentation
Minimal documentation required for compliance
Simple turnover-based tax
Tax on turnover, not complex invoice-wise calculation
Best Fit Analysis: Composition scheme works best if your customers are end consumers (not businesses) and your business has minimal purchases requiring ITC. For B2B sellers, the 1% tax benefit often gets nullified because your buyers cannot claim ITC on purchases from you. Use our GST Calculator to compare regular vs composition tax liability.
Limitations
- Cannot charge GST from customers (no invoice)
- No input tax credit available
- Cannot do inter-state supply
- Must mention "composition taxable person" on bills
How to Register
cmp-02 · registration.steps
- 01
Login to GST Portal
Access the GST portal with your credentials
- 02
Navigate to Registration
Go to Services > Registration > New Registration
- 03
Select Composition Option
Choose "Composition" in the registration type
- 04
Fill CMP-02 Form
Complete the composition scheme intimation form
- 05
Submit and Start Filing
Submit form and begin quarterly return filing
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