GST composition scheme: limits, rates, forms and due dates
The composition scheme under section 10 of the CGST Act, 2017 lets small businesses pay GST at a low fixed percentage of turnover, file one quarterly statement and one annual return, and skip detailed invoice-wise returns. In exchange, they cannot collect GST from customers, cannot claim input tax credit and cannot make inter-state sales. This page covers who can opt, the turnover limits and rates, who is excluded, the forms (CMP-02, CMP-08, GSTR-4) and their due dates, and the pros and cons.
✓Checked against official sources · verified 30 October 2026
Turnover limits
| Scheme | Who | Limit (aggregate turnover of preceding financial year) |
|---|---|---|
| Section 10(1) | Manufacturers, traders and restaurants, in most states (including Gujarat and Dadra & Nagar Haveli and Daman & Diu) | ₹1.5 crore |
| Section 10(1) | Same, in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand | ₹75 lakh |
| Section 10(2A) | Service providers (and mixed suppliers) not eligible under section 10(1) | ₹50 lakh |
The ₹1.5 crore and ₹75 lakh limits come from Notification No. 14/2019-Central Tax, effective 1 April 2019. Aggregate turnover is counted on an all-India PAN basis and includes exempt supplies and exports. A person under section 10(1) can also supply services (other than restaurant service) up to 10% of the previous year's turnover in the state or ₹5 lakh, whichever is higher. If your turnover crosses the limit during the year, the option lapses from that day.
Tax rates
| Category | Total rate | CGST + SGST/UTGST | Calculated on |
|---|---|---|---|
| Manufacturers (other than notified goods) | 1% | 0.5% + 0.5% | Turnover in the state |
| Traders and other eligible suppliers | 1% | 0.5% + 0.5% | Turnover of taxable supplies in the state |
| Restaurants (supply of food or drink as a service, Schedule II para 6(b)) | 5% | 2.5% + 2.5% | Turnover in the state |
| Service providers under section 10(2A) | 6% | 3% + 3% | Turnover of taxable supplies in the state |
The central tax rates are in Rule 7 of the CGST Rules, 2017; an equal amount of state or UT tax is payable. The tax is paid from your own pocket out of the business's earnings, because you cannot charge it separately to the customer. You also pay tax under reverse charge where applicable, at normal rates.
Who cannot opt
- Persons making inter-state outward supplies of goods or services.
- Persons supplying goods or services that are not taxable under GST (for example, alcoholic liquor for human consumption).
- Persons supplying services through an e-commerce operator who collects tax at source under section 52. From 1 October 2023, supply of goods through e-commerce operators is allowed for composition taxpayers (intra-state only).
- Casual taxable persons and non-resident taxable persons.
- Manufacturers of ice cream and other edible ice, pan masala, tobacco and manufactured tobacco substitutes, and aerated waters.
- Service providers other than restaurants under section 10(1) (beyond the small permitted limit); they can use section 10(2A) instead if turnover is within ₹50 lakh.
- Input Service Distributors, TDS/TCS registrants, and where any GSTIN under the same PAN is an SEZ unit or developer (as noted on the GST portal).
All registrations under the same PAN (for example, branches in different states) must opt for composition together.
Forms and due dates
| Form | Purpose | When |
|---|---|---|
| GST CMP-02 | Intimation by an existing regular taxpayer to opt for composition | Before the start of the financial year for which you opt (that is, by 31 March); new applicants opt in the registration application REG-01 |
| GST ITC-03 | Statement of stock held on the day before opting in, and reversal of input tax credit on it | Within 60 days of the date from which composition starts |
| GST CMP-08 | Quarterly statement-cum-challan to pay composition tax | 18th of the month after each quarter (18 July, 18 October, 18 January, 18 April); nil statement required even if no tax is due |
| GSTR-4 | Annual return | 30 June following the end of the financial year (from FY 2024-25 onwards, earlier 30 April) |
| GST CMP-04 | Intimation of withdrawal from the scheme | When you opt out voluntarily, or within 7 days of becoming ineligible |
Due dates can be extended by government notification, so check the due dates page before each filing. Late filing attracts late fee, which you can estimate with our GST late fee calculator.
Bill of supply and display rules
A composition taxpayer cannot issue a tax invoice or show GST on bills. Instead, issue a bill of supply with the words "composition taxable person, not eligible to collect tax on supplies" at the top. You must also display "composition taxable person" on the signboard or notice at your principal place of business and every additional place of business.
Pros and cons
| Advantages | Disadvantages |
|---|---|
| Low tax rate on turnover (1%, 5% or 6%) | No input tax credit on purchases or expenses |
| Fewer returns: one quarterly CMP-08 and one annual GSTR-4 | Business customers cannot claim credit on your sales, so they may prefer a regular supplier |
| Simpler books and lower compliance cost | No inter-state sales, which limits growth outside your state |
| Works well for shops and small restaurants selling mainly to consumers | Tax is paid out of your margin, even on low-profit sales; and you must switch to regular scheme once you cross the limit |
Frequently asked questions
What is the composition limit in Gujarat?
₹1.5 crore of aggregate turnover in the previous financial year for manufacturers, traders and restaurants, and ₹50 lakh for service providers under section 10(2A).
Can a composition dealer sell on Amazon or Flipkart?
For goods, yes, from 1 October 2023, as long as all sales are within the state. Supplying services through an e-commerce operator that collects TCS is not allowed.
Can I opt for composition in the middle of the year?
An existing regular taxpayer files CMP-02 before the start of the financial year. A new business can choose composition while applying for registration.
Do I need to file CMP-08 if I had no sales?
Yes. A nil CMP-08 must still be filed for the quarter.
What is the due date for GSTR-4?
30 June after the end of the financial year, from FY 2024-25 onwards, unless extended.
Can a composition dealer collect GST from customers?
No. Section 10(4) bars collecting tax from customers and claiming input tax credit. You issue a bill of supply instead of a tax invoice.
How TaxEase can help
We compare the tax you would pay under composition and under the regular scheme using your actual purchases and sales, file CMP-02, CMP-08 and GSTR-4 on time, and switch you to the regular scheme when needed. See GST return filing in Vapi, GST registration, our packages, or contact us.
- CBIC: CGST Act, section 10
- Notification No. 14/2019-Central Tax (₹1.5 crore / ₹75 lakh)
- Notification No. 43/2019-Central Tax (aerated waters excluded)
- Finance Bill 2023: GST amendments (goods via e-commerce)
- CGST Rules, Rule 7 (rates of composition levy)
- GST portal: Opt for composition (CMP-02)
- GST portal: FAQs on CMP-08
- CBIC: FAQs on composition levy (bill of supply, signboard, CMP-04)
- Notification No. 12/2024-Central Tax: GSTR-4 due date 30 June
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