GST Composition Scheme — Eligibility, Rates and Returns
The GST composition scheme lets small businesses pay a flat 1%, 5% or 6% of turnover instead of regular GST. The limit is ₹1.5 crore for goods, ₹50 lakh for services. We check whether it suits you, opt you in and file CMP-08 and GSTR-4.
What it is
The GST composition scheme is a simplified option for small businesses. Instead of charging GST on each sale and claiming credit on purchases, you pay a small fixed percentage of your turnover and file one quarterly statement. It suits businesses that would struggle with monthly returns.
The law is Section 10 of the CGST Act, with Section 10(2A) for small service providers. You opt in on the GST portal. In practice, you stay on the scheme for the financial year unless you cross the limit or choose to leave.
Who it applies to
Small traders and manufacturers
Aggregate turnover up to ₹1.5 crore in Haryana and most states, selling goods within the state. The rate is 1% of turnover.
Restaurants without liquor
Eating-place operators that do not serve alcohol can pay 5% of turnover under the scheme.
Small service providers
Under Section 10(2A), service providers with turnover up to ₹50 lakh can opt for 6%. A trader can also supply a limited value of services, up to 10% of turnover or ₹5 lakh, whichever is higher.
Why it matters
Less paperwork
One CMP-08 each quarter and one GSTR-4 each year, instead of twelve GSTR-1 and twelve GSTR-3B returns.
Lower tax, if margins are high
A flat 1% on turnover can beat regular GST for a trader with few GST-bearing purchases.
But no credit and no tax invoices
You cannot claim input tax credit, and business customers cannot claim credit on your sales. Run the comparison before you opt in.
Documents required
To opt in as an existing taxpayer
- GST login and the authorised signatory’s DSC or Aadhaar e-sign
- Turnover figures for the current and previous year
- Stock statement for reversing credit via ITC-03
To start as a new registrant
- Documents listed on our GST Registration page
- Choice of composition recorded in the application
Each quarter
- Sales summary for the quarter
- Proof of tax paid through challan
How it works
Test whether composition really fits
We compare your flat-rate tax with your regular GST position, using sales, purchases and customer mix.
Opt in on the GST portal
We file Form CMP-02 before the financial year starts and prepare the credit reversal through Form ITC-03.
Bill the quarter the composition way
You issue a bill of supply, not a tax invoice, and do not charge GST. The invoice must say you are a composition taxable person.
File CMP-08 and GSTR-4
We pay the tax and file CMP-08 by the 18th after each quarter, then the GSTR-4 annual return by 30 April.
Composition vs regular scheme at a glance
| Composition | Regular | |
|---|---|---|
| Tax rate | 1%, 5% or 6% of turnover | As per the goods or service rate |
| Input tax credit | Not available | Available |
| Charge GST on invoice | No, bill of supply | Yes, tax invoice |
| Inter-state sales | Not allowed | Allowed |
| Returns | CMP-08 quarterly, GSTR-4 annual | GSTR-1 and GSTR-3B |
Take a Faridabad trader selling stationery to local shops and walk-in customers, with few purchases that carry GST. A flat 1% can look attractive. A fabricator buying steel and selling to registered buyers who want credit usually does better on the regular scheme, since credit flows through.
Timelines
Opt in before the year starts
File CMP-02 on or before 31 March to be on composition from 1 April. For 2026-27 that date has gone, so the next window is 31 March 2027.
Quarterly: CMP-08 by the 18th
Due for April–June by 18 July, July–September by 18 October, October–December by 18 January, and January–March by 18 April.
Yearly: GSTR-4 by 30 April
The annual statement for the year just ended is due on 30 April.
What happens if you miss a deadline
Late fee on GSTR-4
₹50 a day, capped at ₹2,000, as set out in the late fee notifications.
Interest on late tax
18% a year under Section 50 on tax paid after the CMP-08 due date.
Loss of the scheme
If you breach a condition, such as making an inter-state sale, you lose the scheme and the regular GST rules apply. Penalties can follow.
Frequently asked questions
What is the turnover limit for the GST composition scheme?
The limit is ₹1.5 crore of aggregate turnover for goods traders and manufacturers, and ₹50 lakh for service providers opting under Section 10(2A). Some North-Eastern states and Himachal Pradesh use ₹75 lakh for goods. Haryana uses ₹1.5 crore. Turnover is counted across all your registrations under one PAN.
What are the composition scheme tax rates?
Manufacturers and traders pay 1% of turnover (0.5% CGST plus 0.5% SGST), restaurants not serving alcohol pay 5%, and service providers under Section 10(2A) pay 6%. The rate applies to turnover, not profit. You pay it from your own pocket. You cannot add GST to your invoice, and that is the catch.
Can I claim input tax credit under composition?
No. A composition dealer cannot claim input tax credit, and cannot collect GST from customers. That is the trade-off for a low flat rate. If most of your purchases carry GST and your customers are businesses who want credit, the regular scheme often works out better for you.
How do I opt in to the composition scheme?
A new business chooses composition while applying for registration. An existing regular taxpayer files Form GST CMP-02 on the GST portal before the financial year begins, for example by 31 March 2026 for 2026-27, and reverses credit on stock through Form ITC-03. We check your numbers first.
Which returns does a composition dealer file?
Form CMP-08 every quarter by the 18th of the month after the quarter, and the annual return GSTR-4 by 30 April of the next financial year. GSTR-1 and GSTR-3B are not filed. A nil CMP-08 is still required. Quarter-end reminders from us keep both on time.
Can a composition dealer sell inter-state or online?
Inter-state supplies are not allowed. Since 1 October 2023 a composition dealer can supply goods through an e-commerce operator, but the inter-state bar still applies, so most marketplace sales across states do not fit. Services supplied through an operator are not allowed. Check your sales pattern before opting in.
What happens if my turnover crosses the limit?
You leave the scheme and become a regular taxpayer from the date you cross the limit. You then charge GST on invoices, file GSTR-1 and GSTR-3B, and can claim credit on your stock using Form ITC-01. We help you plan the switch before you cross the limit so there is no surprise.
What is the late fee for GSTR-4?
The late fee for GSTR-4 is ₹50 a day, capped at ₹2,000. Late CMP-08 payment also attracts interest at 18% a year under Section 50. Filing on the 30 April due date avoids both, and we file well before it so there is room to fix any mismatch.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
There is no government fee to opt in or to file CMP-08 or GSTR-4 on time. Late fees and interest, if any, are set out above.
Ready to begin?
Share your sales and purchase mix and we will tell you whether composition or the regular scheme leaves you better off.