The composition scheme is a simplified option for small taxpayers: pay GST at a low fixed rate on turnover with far less compliance — but with important restrictions.
This guide covers eligibility, rates, and what you give up by opting in.
Who can opt in
Composition is available to small taxpayers below a notified aggregate turnover limit (commonly ₹1.5 crore for goods, lower for special-category states; a separate lower limit applies to eligible service providers). Verify the current limit before opting.
Fixed rates and simpler filing
- Tax is a small fixed percentage of turnover (varies by business type — e.g. traders, manufacturers, restaurants)
- File a quarterly statement (CMP-08) and an annual return instead of monthly detail
- Much lighter record-keeping than regular registration
The trade-offs
- You cannot collect GST from customers — you pay it from your margin
- You cannot claim input tax credit on purchases
- You issue a bill of supply, not a tax invoice
- You generally cannot make inter-state outward supplies
Key takeaways
- Composition = low fixed tax on turnover + minimal compliance.
- Turnover limit applies (commonly ₹1.5 crore for goods) — verify current figure.
- No ITC, no tax collection from customers, bill of supply only.
- Best for small, local B2C businesses that buy from registered suppliers.
This guide is general information, not tax advice. GST rules and rates can change with GST Council notifications — verify specifics on the official GST portal or with your CA.
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