What is Composition Return?
The GST Composition Scheme is a simplified tax payment scheme for small businesses with aggregate annual turnover up to ₹1.5 Crore (₹75 Lakh for special category states). Instead of filing multiple monthly returns and paying tax at regular GST rates, composition dealers pay tax at a flat, lower rate and file simplified quarterly and annual returns.
Composition dealers cannot collect GST from customers and cannot claim Input Tax Credit (ITC). The scheme is ideal for small retailers, manufacturers, and restaurants looking for minimal compliance burden.
Composition Scheme Tax Rates
| Business Type | Tax Rate | On |
|---|
| Manufacturers (other than notified goods) | 1% (0.5% CGST + 0.5% SGST) | Turnover |
| Traders / Retailers | 1% (0.5% CGST + 0.5% SGST) | Turnover |
| Restaurants (not serving alcohol) | 5% (2.5% CGST + 2.5% SGST) | Turnover |
| Service Providers (CGST Rule 7) | 6% (3% CGST + 3% SGST) | Turnover |
Returns to be Filed
| Return | Frequency | Due Date | Purpose |
|---|
| CMP-08 | Quarterly | 18th of month after quarter end | Tax payment statement |
| GSTR-4 | Annual | 30th April of next financial year | Annual return for composition dealers |
Who Can Opt for Composition Scheme?
- Businesses with aggregate annual turnover up to ₹1.5 Crore
- Small manufacturers, traders, and retailers
- Restaurants (not serving alcohol)
- Service providers with turnover up to ₹50 Lakh (under CGST Rule 7)
Who CANNOT Opt for Composition Scheme?
- Businesses making inter-state (out of state) supplies
- E-commerce operators or businesses supplying through e-commerce platforms
- Manufacturers of notified goods (ice cream, pan masala, tobacco, etc.)
- Casual taxable persons or non-resident taxable persons
- Businesses supplying non-taxable goods or services
Key Restrictions
- Cannot collect GST from customers (tax must be borne by the dealer)
- Cannot claim Input Tax Credit (ITC) on purchases
- Must display "Composition Taxable Person" on all invoices and signboards
- Cannot make inter-state supplies
