Composition scheme
What Composition scheme means, where you will meet it and what it means for your business.
DefinitionThe composition scheme is a simplified GST option for small businesses with turnover up to ₹1.5 crore (₹50 lakh for services), paying 1% to 6% of turnover with quarterly filing and no input credit.
Under composition, a trader or manufacturer pays 1% of turnover, a restaurant 5% and a service provider 6%, out of their own margin, instead of charging GST to customers. There is no input tax credit, no inter-state sale, and no tax invoice, only a bill of supply. Filing is light: CMP-08 each quarter and GSTR-4 each year by 30 June. You meet the scheme at GST registration or by opting in with CMP-02 before a financial year starts. What it means for you: if your customers are consumers in your own state and your purchases carry little GST, composition saves effort and some money. If you sell to businesses, across states or through marketplaces to other states, it does not work, and you must exit with CMP-04 the day turnover crosses the limit.