The GST Composition Scheme is designed for small businesses to reduce compliance burden. Instead of filing monthly returns and paying GST on every invoice, composition taxpayers pay a flat quarterly tax as a percentage of their turnover.
Eligibility (Who Can Opt)
| Business Type | Turnover Limit |
|---|---|
| Manufacturers & Traders (goods) | ≤ ₹1.5 Crore aggregate turnover in previous FY |
| Restaurants (food & beverages) | ≤ ₹1.5 Crore aggregate turnover |
| Service providers (SARC scheme) | ≤ ₹50 Lakh aggregate turnover |
Tax Rates Under Composition Scheme
| Type | GST Rate on Turnover |
|---|---|
| Manufacturers | 1% (0.5% CGST + 0.5% SGST) |
| Traders (goods only) | 1% (0.5% CGST + 0.5% SGST) |
| Restaurants | 5% (2.5% CGST + 2.5% SGST) |
| Service providers (SARC) | 6% (3% CGST + 3% SGST) |
Key Restrictions
- Cannot make inter-state outward supply of goods
- Cannot supply exempt goods
- Cannot issue a GST tax invoice — only a Bill of Supply
- Customer cannot claim ITC on purchases from you
- Cannot sell through e-commerce platforms (except restaurants on Zomato/Swiggy)
- Cannot collect GST separately on invoices — tax is borne by you from your turnover
Filing Under Composition Scheme
| Return | Frequency | Due Date |
|---|---|---|
| CMP-08 (tax payment statement) | Quarterly | 18th of month after quarter end |
| GSTR-4 (annual) | Annually | 30th April of next financial year |
Pro Tip
To opt for composition scheme, file Form CMP-02 on the GST portal at the beginning of the financial year (before 31st March). Once opted, it applies for the full year.