What Is the GST Composition Scheme?
The GST Composition Scheme is a simplified tax scheme introduced under Section 10 of the CGST Act, 2017, designed for small taxpayers with annual aggregate turnover up to ₹1.5 crore (₹75 lakh for special category states like Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand).
✅ Key Benefits
- ✓Lower GST rates: 1%, 5%, or 6% (vs. regular 5%-28%)
- ✓Pay tax on total turnover, not on individual invoices
- ✓Quarterly return filing (CMP-08) instead of monthly GSTR-1/GSTR-3B
- ✓One annual return (GSTR-4) instead of 12 monthly returns
- ✓Reduced compliance burden — no detailed invoice-wise reporting
- ✓Lower tax liability for businesses with low margins
⚠️ Restrictions
- •CANNOT claim Input Tax Credit (ITC) on purchases
- •CANNOT make inter-state supplies (only intra-state)
- •CANNOT supply goods through e-commerce platforms (Amazon, Flipkart)
- •CANNOT issue tax invoices — must mention 'composition taxable person' on bills
- •CANNOT collect tax from customers — GST must be absorbed in price
- •If turnover exceeds ₹1.5 crore, must migrate to regular scheme
Who Should Opt for Composition Scheme?
💡 Ideal For
- →Small traders and retailers (kirana stores, general merchants)
- →Manufacturers with turnover under ₹1.5 crore
- →Restaurants and small eateries (not serving alcohol)
- →Businesses selling mostly to end consumers (B2C)
- →Traders with low profit margins where ITC is not critical
- →First-time GST registrants wanting simple compliance
Who Should NOT Opt for Composition Scheme?
❌ Not Suitable For
- •Businesses heavily reliant on ITC (e.g., selling to B2B clients who need tax invoices)
- •Exporters (composition dealers cannot export)
- •Inter-state suppliers (cannot supply outside the state)
- •E-commerce sellers (Amazon, Flipkart, Meesho)
- •Suppliers of exempt goods (ice cream, pan masala, tobacco)
- •Service providers (except restaurants) — most services not eligible
Taxvio, based in Khatauli (Muzaffarnagar, UP), provides expert eligibility assessment, cost-benefit analysis (composition vs. regular), and complete registration support for businesses across Uttar Pradesh, Noida, Delhi NCR, and pan-India.
Composition Scheme Tax Rates
Tax rates under the Composition Scheme are flat rates on total turnover, not on individual transactions. Here's the breakdown:
| Category of Supplier | CGST Rate | SGST/UTGST Rate | Total GST | Example |
|---|---|---|---|---|
| Manufacturers | 0.5% | 0.5% | 1% | Turnover ₹50 lakh → Tax ₹50,000 (1% of ₹50L) |
| Traders / Dealers | 0.5% | 0.5% | 1% | Turnover ₹1 crore → Tax ₹1,00,000 (1% of ₹1Cr) |
| Restaurants (not serving alcohol) | 2.5% | 2.5% | 5% | Turnover ₹80 lakh → Tax ₹4,00,000 (5% of ₹80L) |
| Other Suppliers (mixed supplies) | 3% | 3% | 6% | Turnover ₹60 lakh → Tax ₹3,60,000 (6% of ₹60L) |
💡Important Notes
- →Tax is calculated on TOTAL TURNOVER, not on taxable value of individual invoices
- →For restaurants, if alcohol is served, you CANNOT opt for composition scheme — must go for regular GST
- →If you supply both goods and services (mixed), you fall under 'other suppliers' at 6%
- →From FY 2019-20, manufacturers and traders can also provide services up to ₹5 lakh per FY without affecting composition eligibility
- →Special category states (NE states, Himachal Pradesh, J&K, Uttarakhand) have a turnover limit of ₹75 lakh (not ₹1.5 crore)
GST Composition Scheme Eligibility
To be eligible for the Composition Scheme, ALL of the following conditions must be satisfied:
✅ Who Can Register
Turnover Limit
Annual aggregate turnover in the preceding financial year should NOT exceed ₹1.5 crore (₹75 lakh for special category states). Aggregate turnover includes turnover from ALL GSTINs across India.
Intra-State Supplies Only
You should make supplies ONLY within your state (intra-state). No inter-state supply is allowed under composition scheme.
No E-Commerce Supply
You should NOT supply goods through e-commerce operators like Amazon, Flipkart, or any other online marketplace.
Registered Person
You must be a person registered or liable to be registered under GST. Casual taxable persons and non-resident taxable persons are NOT eligible.
Not Supplying Exempt Goods
You should NOT be engaged in the supply of goods that are not leviable to tax under GST (like alcoholic liquor for human consumption).
Not an Ice Cream / Pan Masala Manufacturer
Manufacturers of ice cream, pan masala, or tobacco products are specifically EXCLUDED from composition scheme.
❌ Who CANNOT Register
- ✗Service providers (except restaurants)
- ✗Persons making inter-state outward supplies
- ✗Suppliers through e-commerce operators (Amazon, Flipkart)
- ✗Manufacturers of ice cream, pan masala, tobacco
- ✗Casual taxable persons and non-resident taxable persons
- ✗Persons supplying goods not leviable to tax (exempt goods)
- ✗Existing taxpayers who have claimed ITC in the current FY (must reverse ITC before opting)
🔄 Switching from Regular to Composition
If you are currently under the regular GST scheme and want to switch to composition, you can do so at the beginning of a financial year (1 April) by filing Form GST CMP-02 BEFORE the commencement of the FY.
⚠️ Important
- • You must reverse ALL Input Tax Credit (ITC) availed before switching
- • File Form ITC-03 to declare stock and ITC reversal
- • Once switched, you cannot go back to regular in the same FY
How to Register Under GST Composition Scheme
Composition scheme can be opted for at the time of new GST registration OR by an existing taxpayer at the beginning of a financial year. Here's the complete process:
Eligibility Assessment by Taxvio
1 dayWe analyze your business type, turnover (previous FY), nature of supplies (intra-state vs. inter-state), e-commerce involvement, and ITC dependency. We determine if composition scheme is beneficial compared to regular GST and provide a written advisory.
Document Collection
1-2 daysWe collect all required documents: PAN card, Aadhaar card, business registration proof (if any), address proof of principal place of business, bank account details, photograph of proprietor/partners/directors, previous year's turnover details (GST returns or books of accounts), and details of all existing GSTINs (if any).
Filing Form GST CMP-02 (Intimation for Composition)
1 dayFor NEW registrations: We tick the composition option in Part B of Form GST REG-01 (GST registration application) and submit GST CMP-02 along with it. For EXISTING taxpayers: We file Form GST CMP-02 on the GST portal BEFORE the beginning of the financial year (usually by 31 March for next FY starting 1 April).
ITC Reversal (if switching from Regular to Composition)
2-3 daysIf you are an existing regular taxpayer opting for composition, we file Form ITC-03 to declare stock on hand and reverse all accumulated Input Tax Credit. Payment of reversed ITC is made via DRC-03 challan.
Composition Certificate Issuance
Immediate (for new reg) / 7 days (for existing)Once CMP-02 is accepted, the GST portal issues a certificate of registration under composition scheme. Your GSTIN remains the same, but your registration status shows 'Composition Taxable Person'.
Display of Composition Status
ImmediateYou must display a notice at your principal place of business: 'Composition Taxable Person, not eligible to collect tax on supplies' (as per Rule 58A). We provide a ready-to-print notice board template.
First CMP-08 Filing (Quarterly Return + Payment)
Every quarterWe guide you to file your first CMP-08 return for the quarter (Q1: Apr-Jun, Q2: Jul-Sep, Q3: Oct-Dec, Q4: Jan-Mar) within 18 days of quarter-end. We calculate tax liability on turnover and facilitate payment via PMT-06 challan.
Annual GSTR-4 Filing
Once a year (by 30 April)At the end of the financial year, we file GSTR-4 (Annual Return for composition dealers) by 30 April of the following FY. This consolidates all quarterly CMP-08 returns and includes reconciliation of tax paid vs. actual turnover.
✅Total Timeline
New registration: 3-7 days from document submission to composition certificate. Existing taxpayer switching: 7-10 days including ITC reversal and CMP-02 approval.
Composition Scheme Compliance Requirements
Composition taxpayers have significantly reduced compliance burden compared to regular taxpayers. Here's what you need to do:
Quarterly CMP-08 Filing & Payment
Every Quarter (Q1-Q4)Deadline: 18th of month after quarter-end
Pay tax on turnover for the quarter via challan PMT-06 and file Form CMP-08 (statement of quarterly turnover and tax paid). For example, for Q1 (Apr-Jun), file by 18 July.
Annual GSTR-4 Filing
Once a YearDeadline: 30 April of next FY
File Annual Return in Form GSTR-4 consolidating all quarterly CMP-08 returns. Contains details of inward and outward supplies, ITC reversal (if any), and tax paid during the FY.
Invoice Requirements
Every TransactionDeadline: N/A
Issue BILL OF SUPPLY (not tax invoice). Must mention 'Composition Taxable Person, not eligible to collect tax on supplies' on every bill. Cannot charge GST separately from customers.
Books of Accounts Maintenance
DailyDeadline: N/A
Maintain accounts as per Rule 56 — stock register, sales register, purchase register. No need to maintain detailed invoice-wise data like regular taxpayers.
Display Board at Business Premises
PermanentDeadline: N/A
Display a notice board at principal place of business stating 'Composition Taxable Person, not eligible to collect tax on supplies' as per Rule 58A.
No ITC Availment
Permanent RestrictionDeadline: N/A
You CANNOT claim Input Tax Credit on any purchases. If you have ITC in electronic credit ledger, it will remain blocked until you switch back to regular scheme.
🔔 Late Filing Penalties
- →CMP-08 late fee: ₹50 per day of delay (₹25 CGST + ₹25 SGST) with a maximum of ₹5,000
- →GSTR-4 late fee: ₹100 per day of delay (₹50 CGST + ₹50 SGST) with a maximum of ₹5,000
- →If turnover exceeds ₹1.5 crore during the FY, you must migrate to regular scheme from the next quarter and reverse back to normal compliance
Documents Required for Composition Scheme Registration
For New GST Registration (with Composition)
- ✓PAN card of proprietor / all partners / all directors
- ✓Aadhaar card of proprietor / authorized signatory
- ✓Photograph (passport size) of proprietor/partners/directors
- ✓Business address proof (rent agreement / property tax receipt / electricity bill)
- ✓Ownership proof of premises (sale deed / NOC from owner)
- ✓Bank account details (cancelled cheque / bank statement)
- ✓Business registration certificate (if partnership firm / company / LLP)
- ✓Turnover details of previous FY (if already in business)
For Existing Taxpayers Switching to Composition
- ✓Existing GSTIN details
- ✓Previous FY GSTR-1 and GSTR-3B (to verify turnover < ₹1.5 crore)
- ✓Current stock statement (for ITC reversal calculation)
- ✓ITC balance as on date of switching (from electronic credit ledger)
- ✓Details of all registered business locations (if multiple GSTINs)
- ✓Turnover breakup (intra-state vs. inter-state — to confirm eligibility)
- ✓Confirmation that no inter-state supply is planned in next FY
- ✓Form ITC-03 (for ITC reversal) — prepared by Taxvio
When Must You Migrate from Composition to Regular Scheme?
You are compulsorily required to migrate from composition to regular scheme if ANY of the following occurs during the financial year:
⚠️ Turnover Exceeds ₹1.5 Crore
Action Required: You must migrate to regular scheme from the NEXT quarter onwards. File Form GST CMP-04 (withdrawal from composition) within 7 days of exceeding the threshold. Start filing monthly GSTR-1 and GSTR-3B.
Example: If turnover crosses ₹1.5 crore in October (Q3), migrate from 1 January (Q4 onwards).
⚠️ Making Inter-State Supply
Action Required: Even ONE inter-state supply disqualifies you from composition. You must migrate to regular scheme from the day of the inter-state supply. File CMP-04 immediately.
Example: If you accidentally supply goods to another state in June, you lose composition eligibility from 1 June itself.
⚠️ Selling on E-Commerce Platform
Action Required: If you start supplying through Amazon, Flipkart, or any e-commerce operator, you must migrate to regular scheme from the day the first e-commerce supply is made.
Example: Listed products on Amazon on 15 August → Must migrate from 15 August and file CMP-04 within 7 days.
⚠️ Voluntary Withdrawal
Action Required: You can voluntarily withdraw from composition scheme by filing Form GST CMP-04 at any time. However, you can re-opt for composition only in the next financial year.
Example: If you withdraw in September, you remain in regular scheme until 31 March of that FY and can opt for composition again from 1 April of next FY.
⚠️ Supplying Exempt Goods
Action Required: If you start supplying goods that are not leviable to tax (like alcoholic liquor), you are disqualified and must migrate to regular scheme immediately.
Example: Restaurant starts serving alcohol → Must migrate from the day alcohol service begins.
📋 Form GST CMP-04 Filing
Form GST CMP-04 (Intimation for withdrawal from composition levy) must be filed within 7 days of the event that disqualified you from composition. Failure to file CMP-04 on time can result in penalties and interest on tax dues.
Taxvio's GST Composition Scheme Services
From eligibility assessment to year-round compliance — we handle every aspect of composition scheme for your business.
Eligibility Assessment & Advisory
Detailed analysis of your business type, turnover, nature of supplies, and ITC dependency. Cost-benefit comparison between composition and regular scheme. Written advisory on the best option.
₹999
New GST Registration with Composition
Complete GST registration for new businesses opting for composition scheme from Day 1. Includes REG-01 + CMP-02 filing, ARN tracking, and GSTIN issuance.
₹2,999
Switching from Regular to Composition
For existing taxpayers migrating to composition at the start of FY. Includes ITC reversal calculation, Form ITC-03 filing, CMP-02 submission, and portal approvals.
₹4,999
Quarterly CMP-08 Filing
Calculation of tax liability on quarterly turnover, payment via PMT-06 challan, and CMP-08 return filing. Includes reconciliation with books and error checks.
₹499/quarter
Annual GSTR-4 Filing
Preparation and filing of Annual Return for composition dealers. Consolidation of all CMP-08 returns, inward-outward supply details, and reconciliation statement.
₹1,499/year
Withdrawal from Composition (CMP-04)
Filing Form GST CMP-04 when you voluntarily withdraw or are compulsorily required to migrate to regular scheme. Includes migration advisory and next-step compliance guidance.
₹1,999
Display Board & Documentation
Provision of 'Composition Taxable Person' display board template (ready to print), bill of supply format, and business stationery updates as per composition rules.
₹499
Books of Accounts Maintenance
Simplified bookkeeping for composition dealers — stock register, sales-purchase register. Monthly reconciliation and MIS reports for turnover tracking.
₹999/month
Notice Response & Rectification
Drafting and filing responses to GST notices related to composition scheme violations, late filing, turnover mismatch, or non-compliance issues.
₹3,999
📦 Annual Compliance Packages
Basic Compliance
₹5,999/year
- ✓4 CMP-08 quarterly filings
- ✓1 GSTR-4 annual filing
- ✓Turnover tracking & alerts
- ✓Email support
Standard (with Bookkeeping)
₹14,999/year
- ✓Everything in Basic
- ✓Monthly books maintenance
- ✓Stock register updates
- ✓Monthly MIS reports
- ✓Priority support
Premium (Complete)
₹19,999/year
- ✓Everything in Standard
- ✓Dedicated accountant
- ✓Turnover optimization advisory
- ✓Notice response (1 per year)
- ✓WhatsApp + call support
Real Stories from Our Composition Scheme Clients
"My annual turnover is around ₹80 lakh. Under regular GST, I was struggling with monthly returns and ITC reconciliation. Taxvio registered me under composition scheme — now I pay just 1% tax and file quarterly. Saved me ₹30,000 annually in compliance costs alone!"
Ramesh Gupta (Kirana Store Owner)
Khatauli
"I run a small family restaurant with ₹1 crore turnover. Taxvio helped me opt for composition at 5% rate instead of 18% regular GST. My tax burden reduced by ₹13 lakh per year! CMP-08 filing is so simple compared to monthly GSTR-3B."
Sunita Devi (Restaurant Owner)
Muzaffarnagar
"I manufacture plastic products with ₹1.2 crore turnover. Taxvio advised composition scheme as I sell mostly to retailers (B2C). Now I pay 1% GST on turnover instead of 18% on each invoice. Compliance is minimal and I can focus on my business."
Vijay Kumar (Manufacturer)
Meerut
GST Composition Scheme Services Across India
Taxvio is based in Khatauli, Muzaffarnagar, UP and provides GST Composition Scheme registration, CMP-08 filing, and compliance for small businesses across Noida, Delhi NCR, Meerut, Ghaziabad, Mumbai, and pan-India online.
Frequently Asked Questions — GST Composition Scheme
Can I issue GST invoices under the Composition Scheme?+
Can I opt for composition scheme in the middle of a financial year?+
What happens to my ITC if I switch from regular to composition?+
Can I claim composition scheme if I have multiple business locations in different states?+
Can I switch back from composition to regular scheme mid-year?+
Are services allowed under the Composition Scheme?+
What is the penalty for not filing CMP-08 on time?+
Simplify Your GST Compliance
Register Under GST Composition Scheme Today
Pay just 1% GST, file quarterly returns, and eliminate monthly compliance hassles. Taxvio provides complete eligibility assessment, CMP-02 registration, CMP-08 filing, and year-round advisory. Ideal for small traders, manufacturers, and restaurants with turnover under ₹1.5 crore. Starting ₹2,999.