The GST Composition Scheme lets small businesses pay tax at just 1-6% of turnover instead of the standard 5-28%. Here's everything you need to know.
Composition Scheme Tax Rates
| Business Type | GST Rate |
|---|---|
| Manufacturers | 1% |
| Traders (goods) | 1% |
| Restaurants (no alcohol) | 5% |
| Service providers | 6% |
These rates apply on total turnover, and the tax comes from your own margin — you cannot collect it from customers.
Who Is Eligible?
- Traders/Manufacturers: Turnover up to ₹1.5 crore (₹75 lakhs for special states)
- Service providers: Turnover up to ₹50 lakhs
- Must operate only within one state (no inter-state supply)
- Cannot sell on e-commerce platforms
- Cannot import/export
Benefits
✅ Much lower tax rates (1% vs 18%)
✅ Only quarterly returns (CMP-08)
✅ One annual return (GSTR-4)
✅ Minimal compliance burden
✅ Lower accounting costs
Limitations
⚠️ Cannot collect GST from customers
⚠️ No Input Tax Credit (ITC)
⚠️ No inter-state sales
⚠️ No e-commerce sales
⚠️ Must print "Composition Taxable Person" on invoices
How to Opt In
New registration: Select "Composition" in REG-01 form on GST portal
Existing taxpayer: File CMP-02 before 31st March
Switch back to regular: File CMP-04 within 7 days
Filing Calendar
| Return | Frequency | Due Date |
|---|---|---|
| CMP-08 | Quarterly | 18th after quarter |
| GSTR-4 | Annual | 30th April |
Compare to regular dealers who file monthly GSTR-1 and GSTR-3B!
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