GST · 6 min read
GST Composition Scheme in India: Who Qualifies & How It Works (2026)
By the India Law Simplified editorial team · Verified against primary government sources (bare Acts & official portals) · Last updated 2026-05-08
The GST Composition Scheme lets eligible small businesses pay GST at a low flat rate with far simpler returns — but you can't claim input tax credit. Here's who qualifies and how it works.
1What is the Composition Scheme?
Instead of charging regular GST slab rates and claiming input tax credit (ITC), a composition taxpayer pays a small flat percentage of turnover and files simplified returns. The trade-off: you cannot collect GST from customers as a separate charge or claim ITC on your purchases, and you can't make inter-state outward supplies or sell through e-commerce operators.
2Who is eligible (verify current limits)
- Goods suppliers/manufacturers/traders: aggregate turnover up to ₹1.5 crore (₹75 lakh in some special-category states).
- Service providers: a separate composition option up to ₹50 lakh turnover.
- Not allowed for inter-state outward supply, e-commerce sellers, or notified goods (e.g. ice cream, pan masala, tobacco).
3Indicative rates (confirm on the GST portal)
- Manufacturers & traders: about 1% of turnover (0.5% CGST + 0.5% SGST).
- Restaurants (not serving alcohol): about 5%.
- Eligible service providers: about 6%.
4The forms — and how to opt in
Opt in by filing Form CMP-02 on the GST portal (at the start of the year or when newly registering). Then pay tax quarterly using Form CMP-08 (a payment statement), and file one annual return in Form GSTR-4. You do not file GSTR-1 or GSTR-3B under composition. To leave the scheme, file CMP-04.
Frequently asked questions
Can a composition dealer claim input tax credit?
No. Composition taxpayers cannot claim ITC on purchases, and cannot charge GST separately on their invoices.
Which returns does a composition taxpayer file?
Quarterly tax payment via Form CMP-08 and an annual return in Form GSTR-4 — not GSTR-1 or GSTR-3B.
How do I opt into the composition scheme?
File Form CMP-02 on the GST portal. Verify the current turnover limits and rates before opting in, as they can change.
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