The composition scheme under Section 10 of the CGST Act lets small taxpayers pay GST as a fixed percentage of turnover instead of charging tax invoice by invoice. It reduces compliance, but it comes with real restrictions, including no input tax credit and no inter-state sales.
Traders, manufacturers and restaurants with aggregate turnover up to Rs. 1.5 crore in the previous financial year can opt in, with a lower limit of Rs. 75 lakh in certain special category States. Service providers and mixed suppliers have a separate option under Section 10(2A) for turnover up to Rs. 50 lakh.
You issue a bill of supply, not a tax invoice, and you cannot collect GST from customers. You cannot claim input tax credit, so the tax on your purchases becomes a cost. You must mention the words composition taxable person on the signboard and on bills. Tax under reverse charge, where applicable, is still payable at the normal rate.
Opt in through Form CMP-02 before the start of the financial year. Pay tax quarterly through CMP-08, due by the 18th of the month after the quarter, and file the annual return GSTR-4 by 30 April after the year ends. If your turnover crosses the limit during the year, you must leave the scheme and file CMP-04, after which normal returns apply.
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This guide explains the law in general terms as of October 2026. Time limits and requirements can depend on the facts of your case and on the notice you received.
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