{"id":10750,"date":"2026-11-01T10:30:00","date_gmt":"2026-11-01T10:30:00","guid":{"rendered":"https:\/\/margbooks.com\/blogs\/?p=10750"},"modified":"2026-10-31T14:13:42","modified_gmt":"2026-10-31T14:13:42","slug":"gst-composition-scheme","status":"publish","type":"post","link":"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/","title":{"rendered":"Composition Scheme under GST: Rules, Benefits &amp; Limits"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 ez-toc-wrap-left counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #1c6e70;color:#1c6e70\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #1c6e70;color:#1c6e70\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#What_Is_the_Composition_Scheme_under_GST\" title=\"What Is the Composition Scheme under GST?\">What Is the Composition Scheme under GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Who_Is_Eligible_and_What_Is_the_Turnover_Limit\" title=\"Who Is Eligible, and What Is the Turnover Limit?\">Who Is Eligible, and What Is the Turnover Limit?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Who_cannot_opt_in\" title=\"Who cannot opt in\">Who cannot opt in<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Simplify_GST_Billing_for_Your_Composition_Scheme_Business\" title=\"Simplify GST Billing for Your Composition Scheme Business\">Simplify GST Billing for Your Composition Scheme Business<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Composition_Scheme_Tax_Rates\" title=\"Composition Scheme Tax Rates\">Composition Scheme Tax Rates<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Key_Rules_and_Conditions\" title=\"Key Rules and Conditions\">Key Rules and Conditions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Benefits_of_the_Composition_Scheme\" title=\"Benefits of the Composition Scheme\">Benefits of the Composition Scheme<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Lower_compliance\" title=\"Lower compliance.&nbsp;\">Lower compliance.&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Simple_tax_calculation\" title=\"Simple tax calculation.&nbsp;\">Simple tax calculation.&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Better_cash_flow\" title=\"Better cash flow.&nbsp;\">Better cash flow.&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#A_good_fit_for_small_B2C_sellers\" title=\"A good fit for small B2C sellers.&nbsp;\">A good fit for small B2C sellers.&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Limits_and_Drawbacks_of_Composition_Scheme_under_GST\" title=\"Limits and Drawbacks of Composition Scheme under GST\">Limits and Drawbacks of Composition Scheme under GST<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#You_lose_input_tax_credit\" title=\"You lose input tax credit\">You lose input tax credit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#No_inter-state_sales\" title=\"No inter-state sales\">No inter-state sales<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#B2B_customers_may_walk_away\" title=\"B2B customers may walk away&nbsp;\">B2B customers may walk away&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Tax_on_all_turnover\" title=\"Tax on all turnover&nbsp;\">Tax on all turnover&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Limited_online_selling\" title=\"Limited online selling&nbsp;\">Limited online selling&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Composition_Scheme_vs_Regular_GST\" title=\"Composition Scheme vs Regular GST\">Composition Scheme vs Regular GST<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Make_GST_Compliance_and_Business_Billing_Easier\" title=\"Make GST Compliance and Business Billing Easier\">Make GST Compliance and Business Billing Easier<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#How_to_Opt_In_Exit_or_Switch_from_Composition_Scheme\" title=\"How to Opt In, Exit or Switch from Composition Scheme\">How to Opt In, Exit or Switch from Composition Scheme<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Return_Filing_and_Due_Dates\" title=\"Return Filing and Due Dates\">Return Filing and Due Dates<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Is_the_Composition_Scheme_Right_for_You\" title=\"Is the Composition Scheme Right for You?\">Is the Composition Scheme Right for You?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/margbooks.com\/blogs\/gst-composition-scheme\/#FAQs\" title=\"FAQs\">FAQs<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>If you\u2019re running a small store, another caf\u00e9, or a small service business, filing your GST can often feel like a bit of a hassle, another job piled on top of your day-to-day work. You have to file GST returns every month, keep invoices in order, track inputs, and keep engaging the services of a chartered accountant or CA. The composition scheme under GST was introduced to reduce that headache. You file returns less frequently compared to the actual GST, pay a lesser amount of tax, and get back to your work.<\/p>\n\n\n\n<p>But all that doesn\u2019t mean that the composition scheme is without its drawbacks. The main drawback is that you lose the ability to claim input tax credit. Whether the scheme is beneficial or not will depend on how the business is actually being run. This article will go through all the various rules, rates, benefits, and drawbacks, so that you can take a decision based on exact numbers.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_the_Composition_Scheme_under_GST\"><\/span><strong>What Is the Composition Scheme under GST?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The composition scheme is an optional, simplified way of paying GST for small taxpayers. Instead of charging GST on each sale and then adjusting it against the tax you paid on purchases, you pay a flat percentage on your total turnover. It comes from Section 10 of the CGST Act, with the procedures set out in Rules 3 to 7 of the CGST Rules.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Is_Eligible_and_What_Is_the_Turnover_Limit\"><\/span><strong>Who Is Eligible, and What Is the Turnover Limit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The limit depends on what you do and where you operate your business.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Goods suppliers (traders and manufacturers):<\/strong> aggregate turnover up to \u20b91.5 crore in the previous financial year.<\/li>\n\n\n\n<li><strong>Certain special category states, mainly in the North East:<\/strong> the limit is \u20b975 lakh.<\/li>\n\n\n\n<li><strong>Service providers:<\/strong> a separate route under Section 10(2A) lets eligible service providers opt in up to \u20b950 lakh.<\/li>\n<\/ul>\n\n\n\n<p>Turnover here means the combined turnover of all your registrations under one PAN, not just one GSTIN. That catches people out. If you have two shops registered under the same PAN, both are counted together.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_cannot_opt_in\"><\/span><strong>Who cannot opt in<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You generally can&#8217;t use the scheme if you:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>make inter-state outward supplies of goods<\/li>\n\n\n\n<li>supply goods through an e-commerce operator who collects tax at source<\/li>\n\n\n\n<li>manufacture certain notified goods such as ice cream, pan masala or tobacco products<\/li>\n\n\n\n<li>supply goods or services that are not taxable under GST<\/li>\n\n\n\n<li>are not eligible on any other ground in the notified conditions<\/li>\n<\/ul>\n\n\n\n<p>If you&#8217;re unsure about your own case, check the latest notifications or ask a CA before you opt in. The list of exclusions has been amended over the years.<\/p>\n\n\n\n<div class=\"banner-container\">\n    <div class=\"inner-container\">\n\n        <div class=\"banner-img-second\">\n            <img decoding=\"async\" data-src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\"><noscript><img decoding=\"async\" data-src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\"><noscript><img decoding=\"async\" src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\"><\/noscript><\/noscript>\n        <\/div>\n\n        <div class=\"banner-content\">\n            <h3><span class=\"ez-toc-section\" id=\"Simplify_GST_Billing_for_Your_Composition_Scheme_Business\"><\/span>Simplify GST Billing for Your Composition Scheme Business<span class=\"ez-toc-section-end\"><\/span><\/h3>\n        <\/div>\n\n        <div class=\"banner-btn-second\">\n            <a href=\"https:\/\/me9.in\/MBB\" target=\"_blank\" rel=\"noopener\">\n                 Book Free Demo!\n            <\/a>\n        <\/div>\n\n    <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Composition_Scheme_Tax_Rates\"><\/span><strong>Composition Scheme Tax Rates<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The rates are applied to your turnover, and they are split equally between CGST and SGST.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Type of business<\/strong><\/td><td><strong>Rate on turnover<\/strong><\/td><\/tr><tr><td>Manufacturers and traders<\/td><td>1%<\/td><\/tr><tr><td>Restaurants not serving alcohol<\/td><td>5%<\/td><\/tr><tr><td>Service providers (Section 10(2A))<\/td><td>6%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Say you run a general store with a turnover of \u20b950 lakh in a year. Under composition, your GST is 1% of that, which is \u20b950,000. Under regular GST, you would charge tax at the applicable rate on each product and then subtract the credit on your purchases. For a low-margin retailer who mostly sells to walk-in customers, the composition figure is often lower and certainly easier to calculate. One thing to take care of is that the tax is on your total turnover, not only the taxable part of it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Rules_and_Conditions\"><\/span><strong>Key Rules and Conditions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Once you&#8217;re in the scheme, the rules are applied to you:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>No input tax credit: <\/strong>You can&#8217;t claim ITC on anything you buy.<\/li>\n\n\n\n<li><strong>No tax collected from customers:<\/strong> You pay the tax out of your own pocket. It can&#8217;t be shown separately on your bills.<\/li>\n\n\n\n<li><strong>Bill of Supply, not tax invoice:<\/strong> You issue a Bill of Supply for your sales.<\/li>\n\n\n\n<li><strong>Display requirements:<\/strong> The words &#8220;composition taxable person, not eligible to collect tax on supplies&#8221; must appear on your bills and on a signboard at your place of business.<\/li>\n\n\n\n<li><strong>All or nothing under one PAN:<\/strong> If you opt in, every registration under that PAN has to be in the scheme.<\/li>\n\n\n\n<li><strong>Reverse charge still applies:<\/strong> If you buy something that attracts reverse charge, you pay that tax separately.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_the_Composition_Scheme\"><\/span><strong>Benefits of the Composition Scheme<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are the benefits of the composition scheme<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lower_compliance\"><\/span><strong>Lower compliance.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Regular taxpayers file monthly or quarterly returns plus an annual return. Composition taxpayers file a quarterly payment statement and one annual return. That means fewer deadlines and, usually, a smaller accountant bill.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Simple_tax_calculation\"><\/span><strong>Simple tax calculation.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You don&#8217;t track credit, match purchase invoices, or worry about supplier defaults. You apply a percentage to turnover and pay.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Better_cash_flow\"><\/span><strong>Better cash flow.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A low flat rate and less paperwork leave more money, and more time, in the business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_good_fit_for_small_B2C_sellers\"><\/span><strong>A good fit for small B2C sellers.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If most of your customers are individuals who don&#8217;t need tax credit, the scheme lines up well with how you sell.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Limits_and_Drawbacks_of_Composition_Scheme_under_GST\"><\/span><strong>Limits and Drawbacks of Composition Scheme under GST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Limits and Drawbacks of the composition scheme under GST.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_lose_input_tax_credit\"><\/span>You lose input tax credit<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If your purchases carry a lot of GST, say you buy costly raw material or equipment, the credit you&#8217;d have claimed under regular GST can be worth more than the saving from the lower rate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_inter-state_sales\"><\/span>No inter-state sales<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Selling goods to another state rules you out. That is a real problem if you want to grow beyond your own state.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"B2B_customers_may_walk_away\"><\/span><strong>B2B customers may walk away<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Your buyers can&#8217;t claim credit on what they purchase from you, because you don&#8217;t issue a tax invoice. Business customers who care about ITC may prefer a regular supplier.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_on_all_turnover\"><\/span><strong>Tax on all turnover<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Because the rate applies to everything you sell, including exempt supplies, the effective burden can be higher than expected in some cases.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Limited_online_selling\"><\/span><strong>Limited online selling<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Supplying goods through an e-commerce operator who collects tax is not allowed under the scheme.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Composition_Scheme_vs_Regular_GST\"><\/span><strong>Composition Scheme vs Regular GST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here is a difference between the composition scheme and regular GST.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><\/td><td><strong>Composition scheme<\/strong><\/td><td><strong>Regular GST<\/strong><\/td><\/tr><tr><td>Tax rate<\/td><td>Fixed 1%, 5% or 6% of turnover<\/td><td>Standard rates by product or service<\/td><\/tr><tr><td>Input tax credit<\/td><td>Not allowed<\/td><td>Allowed<\/td><\/tr><tr><td>Document issued<\/td><td>Bill of Supply<\/td><td>Tax invoice<\/td><\/tr><tr><td>Inter-state supply of goods<\/td><td>Not allowed<\/td><td>Allowed<\/td><\/tr><tr><td>Returns<\/td><td>CMP-08 quarterly and GSTR-4 yearly<\/td><td>GSTR-1 and GSTR-3B, plus annual return<\/td><\/tr><tr><td>Best for<\/td><td>Small B2C businesses with low input credit<\/td><td>B2B sellers, high input credit, inter-state trade<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>If your input credit is small and your buyers are mostly consumers, composition is worth a serious look. If you buy heavily from registered suppliers and sell to other businesses, regular GST usually works out better.<\/p>\n\n\n\n<div class=\"banner-container\">\n    <div class=\"inner-container\">\n\n        <div class=\"banner-img-second\">\n            <img decoding=\"async\" data-src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\"><noscript><img decoding=\"async\" data-src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\"><noscript><img decoding=\"async\" src=\"https:\/\/margBooks.com\/blogs\/wp-content\/uploads\/2026\/07\/Invoice.webp\" alt=\"Growth Image\" title=\"\"><\/noscript><\/noscript>\n        <\/div>\n\n        <div class=\"banner-content\">\n            <h3><span class=\"ez-toc-section\" id=\"Make_GST_Compliance_and_Business_Billing_Easier\"><\/span>Make GST Compliance and Business Billing Easier<span class=\"ez-toc-section-end\"><\/span><\/h3>\n        <\/div>\n\n        <div class=\"banner-btn-second\">\n            <a href=\"https:\/\/me9.in\/MBB\" target=\"_blank\" rel=\"noopener\">\n                 Book Free Demo!\n            <\/a>\n        <\/div>\n\n    <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Opt_In_Exit_or_Switch_from_Composition_Scheme\"><\/span><strong>How to Opt In, Exit or Switch from Composition Scheme<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Opting in.<\/strong> You can choose the scheme when you first register for GST. If you&#8217;re already registered under the regular scheme, file <strong>Form CMP-02<\/strong> before the start of the financial year in which you want to join. You&#8217;ll also need to file <strong>Form ITC-03<\/strong> to reverse the credit on stock you hold at the time of switching.<\/p>\n\n\n\n<p><strong>Leaving voluntarily.<\/strong> File <strong>Form CMP-04<\/strong> if you want to move back to regular GST.<\/p>\n\n\n\n<p><strong>Crossing the limit.<\/strong> If your turnover goes over the permitted limit, or you start doing something that disqualifies you, such as an inter-state sale, you&#8217;re out of the scheme from that point. Move to regular GST and file the required forms on time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Return_Filing_and_Due_Dates\"><\/span><strong>Return Filing and Due Dates<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Composition taxpayers deal with two return filings.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Form CMP-08<\/strong> is a quarterly statement-cum-challan used to pay your tax. It is due by the <strong>18th of the month after each quarter<\/strong>: 18 July, 18 October, 18 January and 18 April.<\/li>\n\n\n\n<li><strong>Form GSTR-4<\/strong> is the annual return. For recent years, it is due on <strong>30 June<\/strong> after the financial year ends. It used to be 30 April, and plenty of older pages still show that date, so check the GST portal for the current one.<\/li>\n<\/ul>\n\n\n\n<p>A useful rule: you can&#8217;t file GSTR-4 until every CMP-08 for that year is filed.<\/p>\n\n\n\n<p>If you pay late, interest at 18% a year applies on the unpaid tax. Late filing of GSTR-4 also attracts a late fee, which has a daily rate and a cap.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_the_Composition_Scheme_Right_for_You\"><\/span><strong>Is the Composition Scheme Right for You?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It probably suits you if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>your annual turnover is under the limit and likely to stay there<\/li>\n\n\n\n<li>you sell mainly within your own state<\/li>\n\n\n\n<li>most customers are individuals, not businesses claiming credit<\/li>\n\n\n\n<li>your purchases carry little GST, or your margins are thin<\/li>\n\n\n\n<li>you want fewer filings and a simpler routine<\/li>\n<\/ul>\n\n\n\n<p>It probably doesn&#8217;t suit you if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>you sell to other states or plan to soon<\/li>\n\n\n\n<li>your business customers insist on tax invoices<\/li>\n\n\n\n<li>you buy a lot from registered suppliers and rely on input credit<\/li>\n\n\n\n<li>you sell mainly through e-commerce platforms<\/li>\n<\/ul>\n\n\n\n<p>When in doubt, run the numbers both ways for one year of your actual sales and purchases. The better option is usually clear on paper.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Composition Scheme under GST is a trade-off between ease of use and flexibility. You have low rates and do less paperwork, but at the same time lose input tax credit and do not sell across states. It works well for a small local business. However, if you are heavily purchasing from registered dealers or making sales to businesses, normal GST might be cheaper overall.<\/p>\n\n\n\n<p>Make sure to do your own calculations first before the decision and speak to a CA in case your situation is complex. Rules and deadlines keep changing, so check the official GST portal for the latest updates.<\/p>\n\n\n\n<p>If you opt for the Composition Scheme, you will find the process easier by using software like <a href=\"https:\/\/margbooks.com\/\">MargBooks<\/a>. This tool allows you to produce Bills of Supply and maintain the required records in a handy way.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span><strong>FAQs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Q1. What is the turnover limit for the composition scheme?<\/strong>&nbsp;<\/h6>\n\n\n\n<p>It is \u20b91.5 crore for most goods suppliers, \u20b975 lakh in certain special category states, and \u20b950 lakh for eligible service providers.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Q2. Can a composition dealer claim input tax credit?<\/strong>&nbsp;<\/h6>\n\n\n\n<p>No. Giving up ITC is the price of the lower rate and simpler compliance.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Q3. Can composition dealers sell inter-state or online?<\/strong>&nbsp;<\/h6>\n\n\n\n<p>Inter-state supply of goods is not allowed. Supplying goods through an e-commerce operator that collects tax is also barred.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Q4. What is the difference between CMP-08 and GSTR-4?<\/strong>&nbsp;<\/h6>\n\n\n\n<p>CMP-08 is the quarterly statement used to pay tax. GSTR-4 is the yearly return that sums up the year. You need both.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\"><strong>Q5. How do I leave the composition scheme?<\/strong>&nbsp;<\/h6>\n\n\n\n<p>File Form CMP-04 to withdraw voluntarily. If you cross the turnover limit or break a condition, you move to regular GST and must follow the exit procedure.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re running a small store, another caf\u00e9, or a small service business, filing your GST can often feel like a bit of a hassle, another job piled on top of your day-to-day work. You have to file GST returns every month, keep invoices in order, track inputs, and keep engaging the services of a [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":10751,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[2557],"tags":[],"class_list":["post-10750","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-gst-compliance"],"blocksy_meta":[],"blog_post_layout_featured_media_urls":{"thumbnail":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-150x150.webp",150,150,true],"full":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST.webp",1200,628,false]},"categories_names":{"2557":{"name":"GST Compliance","link":"https:\/\/margbooks.com\/blogs\/category\/gst-compliance\/"}},"tags_names":[],"comments_number":"0","wpmagazine_modules_lite_featured_media_urls":{"thumbnail":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-150x150.webp",150,150,true],"cvmm-medium":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-300x300.webp",300,300,true],"cvmm-medium-plus":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-305x207.webp",305,207,true],"cvmm-portrait":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-400x600.webp",400,600,true],"cvmm-medium-square":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-600x600.webp",600,600,true],"cvmm-large":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-1024x628.webp",1024,628,true],"cvmm-small":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST-130x95.webp",130,95,true],"full":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2026\/10\/Composition-Scheme-under-GST.webp",1200,628,false]},"_links":{"self":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/10750","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/comments?post=10750"}],"version-history":[{"count":1,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/10750\/revisions"}],"predecessor-version":[{"id":10752,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/10750\/revisions\/10752"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/media\/10751"}],"wp:attachment":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/media?parent=10750"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/categories?post=10750"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/tags?post=10750"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}