The Composition Scheme lets small businesses pay GST at a flat rate with minimal compliance. Find out who qualifies, what the rates are, and the crucial restrictions you must know before opting in.
What Is the Composition Scheme?
The GST Composition Scheme is a simplified tax scheme for small businesses. Instead of filing monthly returns and paying GST on every transaction, you pay a flat percentage of your turnover quarterly.
Who Can Opt In?
Businesses with aggregate annual turnover up to ₹1.5 Crore (₹75 lakhs for special category states) can opt for the Composition Scheme.
Tax Rates Under Composition Scheme
| Business Type | Composition Rate |
|---|---|
| Manufacturers (except notified goods) | 1% of turnover |
| Restaurants (not serving alcohol) | 5% of turnover |
| Other traders | 1% of turnover |
| Service providers (special scheme) | 6% of turnover |
Key Restrictions
⚠️ You cannot collect GST from customers ⚠️ You cannot claim Input Tax Credit ⚠️ You cannot make inter-state supplies ⚠️ You cannot supply through e-commerce operators ⚠️ You cannot supply exempt goods/services if you also supply taxable ones
Compliance Under Composition Scheme
- File CMP-08 (quarterly statement) — due by 18th of month after each quarter
- File GSTR-4 (annual return) — due by 30th April each year
- No monthly GSTR-1 or GSTR-3B required
Should You Choose It?
The scheme is ideal if:
- Your customers are mostly end consumers (B2C), not businesses
- Your profit margins are healthy enough to absorb the flat tax
- You want minimal GST compliance burden
It is not suitable if your buyers need Input Tax Credit (typically B2B businesses).