GST Composition Scheme - Eligibility, Benefits and How to Apply

The GST Composition Scheme is a simplified taxation option for small businesses that reduces compliance burden and allows payment of GST at a lower, fixed rate on turnover instead of maintaining detailed records.

Who is Eligible for Composition Scheme?

• Businesses with aggregate annual turnover up to Rs. 1.5 crore
• Manufacturers and traders of goods
• Restaurant services (not serving alcohol)
• Service providers with turnover up to Rs. 50 lakhs (special composition)

Who Cannot Opt for Composition Scheme?

• Businesses making inter-state supplies
• E-commerce operators
• Manufacturers of notified goods (ice cream, pan masala, tobacco)
• Non-resident taxable persons
• Service providers (except restaurants and special service category)

Composition Scheme Tax Rates

• Manufacturers and traders: 1% of turnover (0.5% CGST + 0.5% SGST)
• Restaurants: 5% of turnover
• Service providers (special): 6% of turnover

Key Benefits

• Lower tax rates compared to regular GST
• Simple quarterly return (CMP-08 and GSTR-4)
• No requirement to maintain detailed GST records
• Reduced compliance burden

Limitations

• Cannot claim Input Tax Credit (ITC)
• Cannot make inter-state supplies
• Must display "Composition Taxable Person" on invoices
• Cannot charge GST separately on bills to customers