The GST Composition Scheme is a simplified GST regime for small taxpayers. Instead of paying regular GST rates and filing monthly returns, eligible businesses can pay a fixed tax rate on turnover, file quarterly, and submit one annual return.
Who Can Opt?
You can choose this scheme if:
- For goods (traders/manufacturers): Aggregate annual turnover ≤ ₹1.5 crore (₹75 lakh for special states).
- For services: Turnover ≤ ₹50 lakh annually.
- Must be intra‑state supplier – no interstate sales.
- Not eligible if dealing in exempt goods (like alcohol, petroleum), supplying via e‑commerce, or providing reverse-charge services.
Tax Rates Under the Scheme
| Category | CGST + SGST | Total Rate |
|---|---|---|
| Traders & Manufacturers (Goods) | 0.5% + 0.5% | 1% |
| Restaurants (non-alcoholic) | 2.5% + 2.5% | 5% |
| Service Providers (eligible) | 3% + 3% | 6% |
Major Benefits
- Lower Taxes: Fixed rates are much lower than standard GST.
- Simplified Compliance: Only
- Quarterly payment (CMP‑08)
- Annual return (GSTR‑4)
- Better Cash Flow: Less frequent filings = more liquidity.
- Minimal Documentation: No complex invoicing or ITC tracking.
Limitations & Costs
- No Input Tax Credit (ITC): Can’t claim taxes paid on purchases.
- Intra‑State Only: Not for inter-state supplies or e‑commerce.
- Restricted Invoices: Must issue Bill of Supply, not tax invoice, and display “Composition taxable person…”.
- Sector Limits: Not allowed for pan masala, tobacco, ice cream manufacturers, casual or non-resident taxpayers.
How to Opt In
- New Registrants: Choose the Composition Scheme in Form GST REG‑01 during registration.
- Existing Registrants: Submit Form CMP‑02 before the start of financial year.
- Provide stock details via Form CMP‑03, if migrating from regular GST.
Filing & Payment Schedule
- Quarterly Tax Payment: Form CMP‑08, due by 18th of month after quarter.
- Annual Return: Form GSTR‑4, due by April 30 of next FY.
- Stay alert: Exceeding turnover or changing business activity = must file Form CMP‑04 to exit .
Final Takeaway
The Composition Scheme is perfect for small, intra‑state businesses aiming for simplified taxes and fewer returns. Just be mindful of its restrictions—no ITC, specific product/service exclusions, and no inter-state trade.
