Still deciding whether you need GST at all? Our GST registration guide covers the thresholds and compulsory cases first.
What is the GST composition scheme?
The composition scheme is an optional way of paying GST under section 10 of the CGST Act, 2017. Instead of charging tax on each invoice and claiming credit on purchases, you pay a fixed percentage of your turnover in the state.
The trade-off is simple. You file fewer returns and pay a low rate, but you cannot collect GST from customers, cannot claim input tax credit and cannot sell to other states. Registered people call a business in this scheme a "composition dealer" or "composition taxable person".
There are two versions. Section 10(1) covers manufacturers, traders and restaurants. Section 10(2A) covers service providers, and businesses that cannot use section 10(1), with a lower turnover limit.
Who is eligible for the composition scheme?
You are eligible if your aggregate turnover in the previous financial year was within the limit for your scheme and none of the exclusions below apply. The test is on aggregate turnover across all GSTINs on your PAN.
Turnover limits
| Scheme | Who it is for | Limit (previous year's aggregate turnover) |
|---|---|---|
| Section 10(1) | Manufacturers, traders, restaurants | ₹1.5 crore |
| Section 10(1), special category states | Same, registered in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura or Uttarakhand | ₹75 lakh |
| Section 10(2A) | Service providers, and suppliers not eligible under section 10(1) | ₹50 lakh |
Assam and Himachal Pradesh follow the ₹1.5 crore limit. If your turnover crosses the limit during the year, the option lapses from the day it crosses.
How much service income a goods business can have
Under section 10(1), you may also supply services other than restaurant service up to 10% of your turnover in the state in the previous year or ₹5 lakh, whichever is higher. A hardware shop that earns some installation income stays eligible as long as that income stays within this limit.
Who cannot opt for composition
- Inter-state sellers. You cannot make any inter-state outward supply, including exports.
- Sellers of non-taxable goods, such as alcoholic liquor for human consumption. This is why a restaurant serving alcohol cannot opt.
- Service sellers through e-commerce operators that collect tax at source. Since 1 October 2023, you may sell goods through e-commerce operators within your state.
- Manufacturers of notified goods: ice cream and edible ice, pan masala, tobacco and manufactured tobacco substitutes, aerated waters, and certain bricks, including building bricks and fly ash bricks.
- Casual taxable persons and non-resident taxable persons.
If one GSTIN on your PAN is ineligible, none can opt, because every registration on the same PAN must follow the same scheme.
Composition scheme rates after GST 2.0
The composition rates did not change when the main GST slabs moved to 5% and 18% (with 40% for demerit goods) on 22 September 2025. They are set in Rule 7 of the CGST Rules and Notification 2/2019-Central Tax (Rate).
| Type of business | Rate (CGST + SGST) | Charged on |
|---|---|---|
| Manufacturer | 1% (0.5% + 0.5%) | Turnover in the state |
| Trader | 1% (0.5% + 0.5%) | Turnover of taxable supplies in the state |
| Restaurant not serving alcohol | 5% (2.5% + 2.5%) | Turnover in the state |
| Service provider under section 10(2A) | 6% (3% + 3%) | Turnover in the state |
You pay this from your own pocket. It cannot be shown on the bill or recovered from the customer as tax.
Is composition the right scheme for you?
Composition works best for a local business selling to consumers, with low GST on its purchases. It works badly for anyone whose customers are GST-registered businesses.
Composition usually fits if:
- most buyers are consumers who cannot use input tax credit anyway;
- you sell only within your state, in a shop, restaurant or local service;
- your purchases carry little GST, so losing credit costs little;
- you want to cut monthly compliance.
Choose regular registration if:
- your buyers are businesses that want tax invoices to claim credit;
- you sell to other states, export, or want to sell services on platforms that collect TCS;
- your purchases, rent or equipment carry 18% GST that you would otherwise absorb;
- you expect to cross the turnover limit soon.
For a side-by-side table and a worked credit example, see regular GST registration. We run that comparison on your own numbers before you choose.
Composition scheme registration fee
Our professional fee is ₹999 for composition registration or for opting in from regular. There is no government fee for choosing composition in REG-01 or for filing CMP-02, CMP-03 or CMP-04.
| Fee | Amount |
|---|---|
| Regikart professional fee, composition registration or CMP-02 opt-in | ₹999 |
| Government fee for REG-01, CMP-02, CMP-03 or CMP-04 | No government fee |
Professional fees exclude GST at 18%. Government fees, where they apply, are paid at actuals to the department and are shown separately. Fees verified on 21 September 2026.
Late fees and interest on returns are not fees for the service. They are set by law and paid to the government; see "Late fee and interest" below.
What is included
- Eligibility check against turnover, activity, location and the notified-goods list, confirmed in writing
- A written comparison of composition against regular on your purchase and sales figures
- REG-01 with the composition option (new business) or CMP-02 (existing taxpayer)
- Help with the CMP-03 stock statement where it applies
- A bill-of-supply format with the required wording, and signboard wording
- A calendar of your CMP-08 and GSTR-4 dates
How to opt for the composition scheme
A new business opts in while applying for GST registration. An existing regular taxpayer files CMP-02 before the financial year starts. There is no mid-year entry.
New business: choose composition in REG-01
When you apply in Form GST REG-01, you select the composition option in the application. Composition then applies from the effective date of your registration. The rest of the application, including Aadhaar authentication, follows the normal registration route described on our GST registration page.
Existing regular taxpayer: file CMP-02 by 31 March
Log in to gst.gov.in and file Form GST CMP-02 before the start of the financial year you want composition for. For FY 2027-28, that means by 31 March 2027. The portal checks your previous year's aggregate turnover across the PAN and will not accept the form if it exceeds the limit.
Before you switch, you must reverse the input tax credit on stock and capital goods through Form GST ITC-03. Any credit left in your electronic credit ledger then lapses, so plan the switch with your stock position in mind.
CMP-03 stock intimation
If you move from regular to composition, file Form GST CMP-03 with details of the stock you hold within 60 days of the date composition takes effect. We prepare the stock list with its purchase sources so the figures match your ITC-03 reversal.
Documents you need
For a new registration you need the same documents as any GST registration. For a CMP-02 opt-in you need your GST login and last year's turnover figures.
| Situation | Documents |
|---|---|
| New proprietorship (see sole proprietorship registration if the business itself is not set up yet) | PAN and Aadhaar of the proprietor, photograph, business address proof (electricity bill or property tax receipt, plus rent agreement or owner's consent letter), bank statement or cancelled cheque |
| New firm, LLP or company | Entity PAN, deed or incorporation documents, authorisation or board resolution, PAN, Aadhaar and photographs of partners or directors, address proof, bank details, DSC of the signatory |
| Existing taxpayer moving to composition | GST portal login, previous year's turnover for every GSTIN on the PAN, closing stock list with purchase sources, DSC or EVC of the signatory |
Composition dealer returns and due dates
A composition dealer files CMP-08 every quarter to pay tax and GSTR-4 once a year. You do not file GSTR-1 or GSTR-3B.
| Return | What it does | Due date |
|---|---|---|
| CMP-08 | Quarterly statement and payment of composition tax | 18th of the month after the quarter |
| GSTR-4 | Annual return of the composition taxpayer | 30 June after the financial year |
Upcoming dates for FY 2026-27:
| Period | Return | Due date |
|---|---|---|
| July to September 2026 | CMP-08 | 18 October 2026 |
| October to December 2026 | CMP-08 | 18 January 2027 |
| January to March 2027 | CMP-08 | 18 April 2027 |
| FY 2026-27 | GSTR-4 | 30 June 2027 |
See every GST, income-tax and ROC date in our compliance calendar.
GSTR-4 moved from 30 April to 30 June from FY 2024-25, so older articles quoting 30 April are out of date. Returns cannot be filed once three years have passed from their due date, so do not leave old periods open. The GSTR-9 annual return is for regular taxpayers (see GSTR-9 annual return); your annual return is GSTR-4. Our GST return filing service covers both regular and composition calendars.
Late fee and interest
| Default | Consequence |
|---|---|
| GSTR-4 filed late | Late fee of ₹50 per day, capped at ₹500 for a nil return and ₹2,000 otherwise |
| Composition tax paid late | Interest at 18% a year on the tax paid late (section 50(1)) |
These amounts are paid to the government, not to Regikart.
Rules a composition taxpayer must follow
Composition comes with conduct rules. If you break them, the officer can deny the option and you then owe tax at normal rates, with penalty.
- Issue a bill of supply, not a tax invoice. Write "composition taxable person, not eligible to collect tax on supplies" at the top of every bill.
- Do not charge GST. No tax line on bills, and no collecting tax from customers.
- Put up the words "composition taxable person" on the signboard or notice at your principal place of business and every additional place.
- No input tax credit. GST on your purchases, rent and services is a cost to your business.
- Sell only within your state. One inter-state sale breaks a basic condition of the scheme.
- One scheme per PAN. All your GSTINs must stay in composition together or leave together.
- Watch your turnover. Crossing the limit ends the option from that day.
Leaving the composition scheme (CMP-04)
You can leave composition at any time by filing Form GST CMP-04. You must file it within 7 days if you cross the turnover limit or stop meeting a condition.
- Voluntary exit: withdrawal can take effect from the current date or a future date you choose.
- Forced exit: file within 7 days of crossing the limit or breaching a condition, such as starting inter-state sales.
- Claim credit on stock: within 30 days of withdrawal, file Form GST ITC-01 to claim input tax credit on stock held on that date.
- Switch your billing: from the effective date, issue tax invoices, charge GST and file GSTR-1 and GSTR-3B.
Withdrawal applies to every GSTIN on the same PAN. See regular GST registration for what changes as a regular taxpayer.
Why Regikart for composition registration
Regikart is a CA and CS firm serving 250+ clients from offices in Kolkata (head office), Delhi and Bengaluru. Every composition application is checked by a Chartered Accountant before it is filed.
- Eligibility first: we check the notified-goods list, the services limit and every GSTIN on your PAN, so the option is not cancelled later.
- Fixed fee: ₹999, with no government fee to add.
- The whole year covered: the same team can file your CMP-08 and GSTR-4, keep your books and reply to any GST notice.