The composition scheme under section 10 of the CGST Act lets a small business pay GST at a flat rate on its turnover, file fewer returns and keep simpler records. In return it gives up input tax credit and cannot charge GST to its buyers.
Limits and rates (as of October 2026)
| Who | Turnover limit (previous year) | Rate on turnover |
|---|---|---|
| Manufacturers and traders | ₹1.5 crore (₹75 lakh in some hill and north-eastern states) | 1% |
| Restaurants not serving alcohol | ₹1.5 crore | 5% |
| Service providers and mixed suppliers | ₹50 lakh | 6% |
Conditions
- Issue a bill of supply that says you are a composition taxable person.
- No inter-state sales of goods.
- Some goods are excluded, such as ice cream, pan masala and tobacco.
- Pay tax quarterly through CMP-08 and file GSTR-4 once a year.
- Opt in before the financial year starts.
Is it right for you
It suits a shop selling to consumers in one state with low purchase GST. It suits a business selling to other businesses poorly, because those buyers cannot claim credit on your bills and may prefer a regular supplier. Work through both with your CA before choosing.