Check GST Composition Scheme eligibility and compare your annual tax under composition vs regular GST regime.
| Feature | Regular GST | Composition Scheme |
|---|---|---|
| Turnover limit | No limit | ₹1.5 crore (₹75L special states) |
| ITC on purchases | Eligible | Not allowed |
| Collect GST from customers | Yes — on every invoice | Cannot collect GST from customers |
| Returns to file | Monthly GSTR-1 + GSTR-3B (or quarterly) | Quarterly CMP-08 (tax payment) + Annual GSTR-4 |
| Tax rate | Standard rate (5%/12%/18%/28%) | 1% or 5% or 6% on turnover |
| Inter-state supply | Allowed | NOT allowed — local sales only |
| E-commerce supply | Allowed | NOT allowed |
| Invoice type | Tax invoice with GST details | Bill of Supply (no GST amount shown) |
| Compliance burden | High (monthly filings) | Low (quarterly payments, annual return) |
| Tax on non-GST goods | As per applicable rate | Cannot opt in |
| Eligible business types | All registered persons | Traders, manufacturers, restaurants only |
The Composition Scheme under Section 10 of the CGST Act is designed to reduce compliance burden for small businesses. Instead of maintaining detailed records, filing multiple returns, and computing ITC, a composition dealer simply pays a fixed percentage of their turnover as tax.
The key trade-off: Composition dealers cannot claim ITC on purchases and cannot collect GST from their customers. This means their GST liability comes entirely from their margin. If a trader's margin is 10% and the composition rate is 1%, the effective tax on margin is only 10% of 1% — very low. But if purchase prices spike and margins shrink, the composition rate can become disproportionate.
Who should NOT choose composition: Businesses that sell inter-state, sell through e-commerce platforms (Flipkart, Amazon), have large purchase volumes (where ITC benefit under regular scheme would exceed composition tax savings), or have B2B customers who need GST invoices to claim ITC.
Composition scheme rules are governed by Section 10 of the CGST Act and CGST Rules 2017. Rates and thresholds are subject to GST Council revision.
| Feature | Regular Scheme | Composition Scheme |
|---|---|---|
| Tax on | Each taxable supply (output tax) | Aggregate turnover (flat rate) |
| ITC on purchases | Available | Not available |
| Can collect GST from customer | Yes — issue tax invoice | No — issue Bill of Supply only |
| Interstate supply | Allowed | Not allowed |
| E-commerce supply | Allowed | Not allowed (some exceptions) |
| Returns per year | 24 (monthly) or 8 (QRMP) | 5 (4 CMP-08 + 1 GSTR-4) |
| Tax rate | 5%, 12%, 18%, or 28% on output | 1% / 5% / 6% on turnover |
| Turnover limit | No upper limit | ₹1.5 crore (₹50 lakh for services) |
| Reverse charge | Applicable (buyer pays) | Applicable (buyer pays RCM) |
| Input tax benefit | Yes — ITC reduces net tax | No — full composition tax from own funds |
| Compliance burden | Higher — monthly returns | Lower — quarterly CMP-08 |
| Best for | High-margin businesses, exporters, B2B suppliers | Low-margin traders/manufacturers with simple B2C operations |
Use our dedicated composition calculator to get exact quarterly CMP-08 payments and compare with regular scheme tax.
Open Composition Calculator →