The composition scheme reduces return frequency and uses turnover-based tax rates, but the taxpayer cannot collect tax from customers or claim ITC and generally cannot make interstate outward supplies. The usual preceding-year turnover ceiling is ₹1.5 crore for eligible goods businesses and ₹50 lakh for the separate 6% service-provider scheme, subject to state and statutory conditions.
Current law first, source draft second
This page preserves the useful intent of the supplied draft but corrects duplicated text, outdated dates, unsupported statistics and overbroad legal statements. Rates and portal procedures can change; verify the live notification and facts before filing or pricing.
Effective-date control: A rate, waiver or procedure described for an earlier period must not be applied to a 2026 transaction merely because it still appears in an older article or search result.
Who can opt
Eligible manufacturers, traders and restaurants not serving alcohol may use section 10(1), while eligible service or mixed suppliers may use section 10(2A). Aggregate turnover is PAN-based and includes specified supplies across registrations.
Who cannot opt
Common disqualifiers include interstate outward supplies, supplies through an e-commerce operator required to collect TCS where the statutory condition applies, non-resident or casual taxable status, and manufacture of notified excluded goods.
Rates and tax base
Manufacturers and traders commonly face 1% combined tax subject to the statutory turnover base; eligible restaurants 5%; eligible section 10(2A) suppliers 6%. Apply the precise Act, rules and notifications rather than a simplified label.
How to opt
New applicants choose the option in REG-01. Existing registered persons generally file CMP-02 before the financial year and complete stock or ITC transition steps, including ITC-03 where applicable.
Compliance
Issue a bill of supply, display composition status, pay through CMP-08 by the prescribed quarterly due date, file annual GSTR-4, maintain records and monitor turnover continuously. Exit promptly when a condition ceases to be satisfied.
Decision test
Composition works best for local B2C businesses with modest taxable inputs and price-sensitive compliance needs. Regular GST may be better for B2B customers demanding ITC, interstate expansion, high input taxes or fast growth.
Get the GST position checked before acting
Map the transaction, effective date, registration, classification, valuation, input credit and return treatment to the current law and documents.
Request a GST compliance reviewFrequently asked questions
What is the main turnover limit?
The common limit for eligible goods businesses is ₹1.5 crore in the preceding financial year, with ₹75 lakh applying in specified states.
What is the service-provider limit?
The separate section 10(2A) scheme commonly uses a ₹50 lakh preceding-year ceiling.
Can composition taxpayers claim ITC?
No.
Can they charge GST on invoices?
No. They issue a bill of supply and cannot collect tax from the recipient.
Can they sell interstate?
They generally cannot make interstate outward supplies.
Which returns are filed?
CMP-08 is the quarterly payment statement and GSTR-4 is the annual return.
When must a taxpayer exit?
When turnover exceeds the limit or any eligibility condition ceases to be met, subject to the prescribed intimation and transition process.
