GST Composition Scheme (2026): Rates, Limits, the No-ITC Trade-off & Whether It Fits Your Business

Print a compliant Bill of Supply in seconds

Composition dealers can’t issue a tax invoice — they need a Bill of Supply with the right declaration. GST Bill Maker generates a compliant Bill of Supply for composition dealers, correctly labelled, with no tax column. Browse the Knowledge Center for more GST guides for small businesses.

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Q: Can I sell on Amazon under the composition scheme? A: No. Selling through an e-commerce operator that collects TCS is not allowed under composition; you’d need to register as a regular dealer.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Composition tends to suit a business that sells mostly to end consumers within one state, has thin input GST to lose, and values simple filing. It’s a poor fit if your customers are businesses who need ITC, if you buy heavily (losing that credit hurts), or if you plan to sell inter-state or online. Run the numbers both ways: a 1% flat rate looks cheap until you add back the ITC you’re forfeiting and the B2B customers you may lose.

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Existing taxpayers switch in by filing CMP-02 on or before 31 March for the next financial year; new registrations choose it at sign-up (CMP-01/registration). If your turnover crosses the limit mid-year, you must exit the scheme, switch to regular GST from that point, and start charging tax and filing monthly — so watch the threshold closely.

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

The ₹50 lakh service-provider route (Notification 2/2019) opened the scheme to small service businesses that were earlier shut out. Turnover is measured on aggregate turnover across the same PAN, so all your GSTINs count together.

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Who can opt in — the turnover limits

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

Who can opt in — the turnover limits

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

The composition scheme is GST’s simplified track for small businesses: pay a small flat percentage of turnover, file quarterly instead of monthly, and skip the invoice-level detail. For a neighbourhood trader or restaurant it can be a genuine relief. But it comes with hard trade-offs — no input tax credit, no tax charged to customers, no inter-state sales, and no selling through marketplaces. This guide lays out the eligibility limits, the exact rates, the restrictions, and the filing routine, so you can decide whether it actually fits your business. Position as of FY 2026-27.

At a glance

Turnover limit: ₹1.5 crore for goods/manufacturers (₹75 lakh in special-category states); a separate ₹50 lakh scheme for service providers.
Rates: 1% for traders & manufacturers, 5% for restaurants, 6% for other service providers.
No ITC, and you cannot charge GST to your customers — the tax comes out of your margin.
Issue a Bill of Supply, not a tax invoice, and display “composition taxable person”.
File CMP-08 quarterly (by the 18th) and GSTR-4 annually (by 30 June).
Opt in with CMP-02 by 31 March for the coming financial year.

Who can opt in — the turnover limits

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

At a glance

Turnover limit: ₹1.5 crore for goods/manufacturers (₹75 lakh in special-category states); a separate ₹50 lakh scheme for service providers.
Rates: 1% for traders & manufacturers, 5% for restaurants, 6% for other service providers.
No ITC, and you cannot charge GST to your customers — the tax comes out of your margin.
Issue a Bill of Supply, not a tax invoice, and display “composition taxable person”.
File CMP-08 quarterly (by the 18th) and GSTR-4 annually (by 30 June).
Opt in with CMP-02 by 31 March for the coming financial year.

Who can opt in — the turnover limits

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).

Print a compliant Bill of Supply in seconds

At a glance

Turnover limit: ₹1.5 crore for goods/manufacturers (₹75 lakh in special-category states); a separate ₹50 lakh scheme for service providers.
Rates: 1% for traders & manufacturers, 5% for restaurants, 6% for other service providers.
No ITC, and you cannot charge GST to your customers — the tax comes out of your margin.
Issue a Bill of Supply, not a tax invoice, and display “composition taxable person”.
File CMP-08 quarterly (by the 18th) and GSTR-4 annually (by 30 June).
Opt in with CMP-02 by 31 March for the coming financial year.

Who can opt in — the turnover limits

Business type	Turnover limit	Special-category states
Traders & manufacturers (goods)	₹1.5 crore	₹75 lakh
Restaurants (non-alcohol)	₹1.5 crore	₹75 lakh
Other service providers	₹50 lakh	₹50 lakh

The rates

Category	Total rate	Split
Manufacturers	1%	0.5% CGST + 0.5% SGST
Traders	1%	0.5% + 0.5%, on taxable turnover
Restaurants (non-alcohol)	5%	2.5% + 2.5%
Other service providers	6%	3% + 3%

Note the rate applies to your turnover, not your value added — and it comes out of your own pocket, because you can’t add it to the customer’s bill.

The big trade-offs

Composition buys simplicity by taking things away. Before you opt in, be sure you can live without all of these:

No input tax credit. The GST you pay on purchases, rent, and equipment is a pure cost — you can’t set it off.
No tax charged to customers. You issue a Bill of Supply, not a tax invoice, so you can’t pass GST on. Your B2B customers get no ITC from you, which makes you less attractive to business buyers.
No inter-state outward supplies. You can only sell within your own state. One inter-state sale and you’re out of the scheme.
No sales through e-commerce operators. If you want to sell on Amazon or Flipkart, composition is off the table (those sellers must register normally — see our e-commerce GST guide).
Reverse charge still applies at normal rates on purchases where RCM is triggered — the flat rate covers only your outward supplies.
Not for notified goods — manufacturers of items like ice cream, pan masala and tobacco are excluded, as are suppliers of non-taxable goods such as alcohol.

Compliance: lighter, but not zero

The filing load is the scheme’s main draw — quarterly instead of monthly:

CMP-08 — a simple quarterly challan-cum-statement to pay your tax, due by the 18th of the month after each quarter.
GSTR-4 — one annual return, due by 30 June following the financial year.
Display requirement — show “composition taxable person” on your signboard and at the top of every Bill of Supply.

Opting in and out

So — is it right for you?

Common mistakes to avoid

Charging GST on the bill — composition dealers must issue a Bill of Supply and cannot collect tax.
Making an inter-state sale — a single one disqualifies you from the scheme.
Assuming it’s cheaper without costing the lost ITC and lost B2B customers.
Missing the 31 March opt-in window — you can only switch at the start of a financial year.
Forgetting RCM — reverse-charge liabilities are still payable at normal rates.
Not displaying the required declaration on premises and bills.

Frequently asked questions

Q: Can a composition dealer claim input tax credit? A: No. Forfeiting ITC is the core trade-off of the scheme — input GST becomes a cost.

Q: What’s the rate for a small consultancy or service business? A: 6% (3% CGST + 3% SGST) under the ₹50 lakh service-provider scheme (Notification 2/2019).

Q: Do I issue a tax invoice? A: No — a Bill of Supply, marked “composition taxable person”. Our tool prints this format automatically.

Q: How often do I file? A: A quarterly CMP-08 (by the 18th) to pay tax, plus one annual GSTR-4 (by 30 June).