\n| \n Special category states (Northeast + Uttarakhand)<\/span><\/p>\n<\/td>\n | \n Rs 75 lakh<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Service providers<\/span><\/p>\n<\/td>\n | \n Rs 50 lakh<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nIf you run two businesses under the same PAN, their combined turnover counts. Not each business separately.<\/span><\/p>\nYou can use Composition if you are:<\/b><\/p>\n\n- A retail or wholesale goods trader<\/span><\/li>\n
- A small manufacturer<\/span><\/li>\n
- A restaurant owner who does not serve alcohol<\/span><\/li>\n
- A service provider below Rs 50 lakh turnover<\/span><\/li>\n<\/ul>\n
<\/span>Who Cannot Use the GST Composition Scheme?<\/b><\/span><\/h2>\nThese businesses are specifically excluded; no exceptions:<\/span><\/p>\n\n- Businesses that sell goods to customers in another state<\/span><\/li>\n
- Sellers on Amazon, Flipkart, Meesho, Swiggy, Zomato, or any other e-commerce platform<\/span><\/li>\n
- Manufacturers of ice cream, pan masala, tobacco products, and aerated drinks<\/span><\/li>\n
- Anyone whose turnover has already crossed the composition limit<\/span><\/li>\n
- Casual and non-resident taxable persons<\/span><\/li>\n<\/ul>\n
The inter-state restriction catches a lot of people off guard. If you sell even one order to a customer in a different state, you cannot use Composition. You must be selling only within your own state.<\/span><\/p>\n<\/span>GST Composition Scheme Tax Rates in 2026<\/b><\/span><\/h2>\n\n\n\n| \n Business Type<\/b><\/p>\n<\/td>\n | \n Tax Rate<\/b><\/p>\n<\/td>\n | \n Split<\/b><\/p>\n<\/td>\n<\/tr>\n\n| \n Traders buying and selling goods<\/span><\/p>\n<\/td>\n | \n 1% of total sales<\/span><\/p>\n<\/td>\n | \n 0.5% CGST + 0.5% SGST<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Manufacturers<\/span><\/p>\n<\/td>\n | \n 1% of total sales<\/span><\/p>\n<\/td>\n | \n 0.5% CGST + 0.5% SGST<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Restaurants without alcohol<\/span><\/p>\n<\/td>\n | \n 5% of total sales<\/span><\/p>\n<\/td>\n | \n 2.5% CGST + 2.5% SGST<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Service providers<\/span><\/p>\n<\/td>\n | \n 6% of total sales<\/span><\/p>\n<\/td>\n | \n 3% CGST + 3% SGST<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nThese rates apply to your total sales, not your profit. If you sell Rs 10 lakh worth of goods in a quarter and you are a trader, you pay Rs 10,000 in tax. No deductions. No credits. Under regular GST, you would collect 12% or 18% from the buyer and then claim back whatever GST you paid on your purchases. Composition removes all that back and forth but also removes the credit benefit.<\/span><\/p>\n<\/span>Real Benefit: How Much Does It Actually Save?<\/b><\/span><\/h2>\nTake a trader with Rs 80 lakh annual turnover. Under regular GST at 12%, he collects Rs 9.6 lakh from buyers but claims back ITC on his purchases. Say his purchases are Rs 60 lakh with Rs 7.2 lakh of ITC. Net GST payable is Rs 2.4 lakh.<\/span><\/p>\n\n- Under the <\/span>GST Composition Scheme<\/b> at 1%, he pays Rs 80,000 total. No ITC. No collection from buyers.<\/span><\/li>\n
- Saving: Rs 1.6 lakh per year in tax alone. Plus Rs 18,000 in accountant fees saved. Plus dozens of hours saved.<\/span><\/li>\n<\/ul>\n
This math works well for businesses with high sales volume relative to purchases and customers who are mostly end consumers who do not need a GST invoice. It works less well for businesses where most buyers are other GST-registered companies who need ITC.<\/span><\/p>\n<\/span>The Real Limitations You Need to Know<\/b><\/span><\/h2>\n\n- You cannot charge GST from your customers:<\/b> Under Composition, you issue a Bill of Supply, not a Tax Invoice. Your buyers get no Input Tax Credit from buying from you. If your customers are businesses that depend on ITC, many of them will prefer buying from a regular GST dealer instead. This can push away B2B customers.<\/span><\/li>\n
- No inter-state sales at all:<\/b> This is a hard rule. One sale to a buyer in another state and you are disqualified.<\/span><\/li>\n
- No e-commerce:<\/b> Cannot sell on any online marketplace. If you list on Amazon or Swiggy even once, Composition ends.<\/span><\/li>\n
- No ITC on your purchases:<\/b> Every rupee of GST you pay when buying stock, equipment, or raw materials is a dead cost. You cannot recover it.<\/span><\/li>\n
- Turnover cap is strict:<\/b> Cross Rs 1.5 crore during the year and Composition automatically lapses. You switch to regular GST from that date and must start filing monthly returns immediately.<\/span><\/li>\n<\/ul>\n
<\/span>Composition Scheme vs Regular GST: Side by Side<\/b><\/span><\/h2>\n\n\n\n| \n What Matters<\/b><\/p>\n<\/td>\n | \n Composition Scheme<\/b><\/p>\n<\/td>\n | \n Regular GST<\/b><\/p>\n<\/td>\n<\/tr>\n\n| \n Who it suits<\/span><\/p>\n<\/td>\n | \n Local B2C traders, small restaurants<\/span><\/p>\n<\/td>\n | \n B2B businesses, e-commerce, inter-state sellers<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Tax rate<\/span><\/p>\n<\/td>\n | \n 1% to 6% on sales<\/span><\/p>\n<\/td>\n | \n 5% to 28% on value added<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Input Tax Credit<\/span><\/p>\n<\/td>\n | \n Not available<\/span><\/p>\n<\/td>\n | \n Fully available<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Return filings per year<\/span><\/p>\n<\/td>\n | \n 5 (4 quarterly + 1 annual)<\/span><\/p>\n<\/td>\n | \n 24 (monthly GSTR-1 + GSTR-3B)<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Inter-state sales<\/span><\/p>\n<\/td>\n | \n Not allowed<\/span><\/p>\n<\/td>\n | \n Allowed<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n E-commerce<\/span><\/p>\n<\/td>\n | \n Not allowed<\/span><\/p>\n<\/td>\n | \n Allowed<\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n GST invoice to buyers<\/span><\/p>\n<\/td>\n | \n Cannot issue<\/span><\/p>\n<\/td>\n | \n Can issue<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nThe decision is simple once you know your customer base. If most of your buyers are regular people who do not need a GST invoice and you sell only in your own state, Composition almost always makes more sense. If you sell to companies or sell across states or online, stick with regular GST.<\/span><\/p>\n<\/span>How to Opt Into the GST Composition Scheme<\/b><\/span><\/h2>\n\n- If you are registering for GST for the first time:<\/b> Select Composition at the time of applying on gst.gov.in. Your registration comes through under the Composition category from day one.<\/span><\/li>\n
- If you are already a regular GST taxpayer:<\/b> You can switch only at the start of a new financial year. File Form CMP-02 on the GST portal before 31st March. You cannot switch in the middle of the year.<\/span><\/li>\n
- After switching:<\/b> You must file Form ITC-03 within 60 days of opting in. This reverses the Input Tax Credit you accumulated on your existing stock and assets before the switch. Many businesses miss this step and get notices later.<\/span><\/li>\n<\/ul>\n
Once you are in, you stay in until you either choose to opt out, your turnover crosses the limit, or you start making inter-state sales or e-commerce transactions.<\/span><\/p>\n<\/span>Filing Requirements After You Opt In<\/b><\/span><\/h2>\nThis is the part that makes the <\/span>GST Composition Scheme<\/b> genuinely attractive for small businesses:<\/span><\/p>\n\n- CMP-08:<\/b> A quarterly payment summary. Filed four times a year, once every quarter, within 18 days of the quarter ending. This is where you declare your sales and pay the flat rate tax.<\/span><\/li>\n
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