The GST composition scheme is designed for small taxpayers who want simpler compliance. Instead of regular returns and invoice-level reporting, they pay GST at a low flat rate on turnover and file a quarterly statement.
This guide explains eligibility, the composition tax rates, restrictions, and how to file CMP-08 and the annual GSTR-4.
What is GST Composition Scheme?
Under composition, a business pays a fixed percentage of turnover as GST and cannot collect GST from customers or claim input tax credit. It suits small traders, manufacturers and eligible service providers.
The scheme has a turnover cap (₹1.5 crore for goods; ₹50 lakh under the services composition option) and several restrictions.
| Turnover cap (goods) | ₹1.5 crore (₹75 lakh in some states) |
|---|---|
| Rate — traders | 1% of turnover |
| Rate — manufacturers | 1% of turnover |
| Rate — restaurants (non-alcohol) | 5% of turnover |
| Quarterly payment | CMP-08 |
| Annual return | GSTR-4 |
Who cannot opt for composition
- Businesses making inter-state outward supplies
- E-commerce sellers required to collect TCS
- Manufacturers of certain notified goods (e.g. ice cream, pan masala, tobacco)
- Casual and non-resident taxable persons
Step-by-step process
- Opt in. File CMP-02 to opt into the scheme (at registration or start of a year).
- Issue bills of supply. Charge no GST on invoices; issue a bill of supply instead of a tax invoice.
- Pay quarterly via CMP-08. Pay the flat tax on turnover each quarter using CMP-08.
- File GSTR-4 annually. File the annual return GSTR-4 by the due date.
Frequently asked questions
Can composition dealers claim ITC?
No. Composition taxpayers cannot claim input tax credit and cannot charge GST to customers.
What is CMP-08?
CMP-08 is the quarterly statement-cum-challan through which composition taxpayers pay their tax.