What is the turnover limit for the GST composition scheme?

₹1.5 crore in the previous financial year for manufacturers, traders and restaurants (₹75 lakh in some north-eastern states and Uttarakhand), and ₹50 lakh for service providers.

Can a composition dealer charge GST on the bill?

No. A composition dealer issues a bill of supply without GST and pays the composition tax out of its own revenue.

Can composition dealers sell to other states?

No. Composition dealers cannot make inter-state outward supplies. They can buy from other states.

Can I claim input tax credit under composition?

No. Neither the composition dealer nor its business buyers can claim credit for the tax on its supplies.

GST composition scheme explained

Updated 11 October 2026

The composition scheme lets small businesses pay GST as a small flat percentage of their turnover, with quarterly payments and an annual return instead of monthly invoice-level filing. It suits shops and restaurants that sell mainly to consumers. The trade-off: you cannot charge GST to customers, and you cannot claim input tax credit on purchases.

Turnover limits and rates

Type of business	Turnover limit (previous year)	GST rate
Manufacturers	₹1.5 crore (₹75 lakh in some states)	1% (0.5% CGST + 0.5% SGST)
Traders	₹1.5 crore (₹75 lakh in some states)	1% of taxable turnover
Restaurants (not serving alcohol)	₹1.5 crore (₹75 lakh in some states)	5% (2.5% CGST + 2.5% SGST)
Service providers and mixed suppliers	₹50 lakh	6% (3% CGST + 3% SGST)

The lower ₹75 lakh limit applies in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand. Turnover is counted across all registrations under the same PAN, and if you opt in, all those registrations must use the scheme.

Goods-based composition dealers may also supply some services, up to 10% of their turnover or ₹5 lakh, whichever is higher.

Who cannot opt

Businesses making inter-state sales of goods or services
Suppliers of services through e-commerce operators (selling goods through e-commerce platforms within your own state has been allowed since October 2023)
Manufacturers of ice cream, pan masala, tobacco products and aerated water
Casual taxable persons and non-resident taxable persons
Suppliers of goods that are not taxable under GST, such as alcohol for human consumption

Rules you must follow

Issue a bill of supply, not a tax invoice, with the words "composition taxable person, not eligible to collect tax on supplies".
Do not show or collect GST from customers. The tax comes out of your own margin.
Display "composition taxable person" on your signboard and at your place of business.
No input tax credit on purchases.
Pay tax under reverse charge at the normal rate where it applies.

Returns and payments

CMP-08: quarterly statement and payment of tax, due by the 18th of the month after each quarter.
GSTR-4: annual return, due by 30 June after the financial year.

That is five filings a year, against 24 or more for a monthly regular taxpayer. See GST returns and due dates.

Worked example. A kirana shop under composition has taxable sales of ₹18,00,000 in the April to June quarter. Tax = 1% × ₹18,00,000 = ₹18,000, split as ₹9,000 CGST and ₹9,000 SGST, paid through CMP-08 by 18 July.
A small restaurant with quarterly sales of ₹25,00,000 pays 5% = ₹1,25,000 (₹62,500 CGST + ₹62,500 SGST).
A tutor or consultant with annual receipts of ₹40,00,000 under the services scheme pays 6% = ₹2,40,000 for the year.

How to opt in or out

New businesses choose composition in the registration application.
Existing taxpayers file form CMP-02 on the GST portal before the start of the financial year (usually by 31 March), and the scheme applies from 1 April.
To leave, file CMP-04. If your turnover crosses the limit during the year, you must move to the regular scheme and inform the department within seven days.

Composition vs regular scheme at a glance

Feature	Composition	Regular
Tax rate	Flat 1%, 5% or 6% of turnover	Normal rate (5%, 18% or 40%) on each sale
Collect GST from customers	No	Yes
Input tax credit on purchases	No	Yes
Document issued	Bill of supply	Tax invoice
Inter-state sales	Not allowed	Allowed
Filings in a year	4 CMP-08 + 1 GSTR-4	Monthly or quarterly GSTR-1 and GSTR-3B, plus GSTR-9 where applicable
Business buyers can claim credit	No	Yes

Because the composition tax comes out of your own pocket, think of it as a cost of about 1% of sales for a trader. Against that, you save the time and cost of monthly invoice-level filing.

Is composition right for you?

It works well if you sell mainly to consumers who cannot claim credit anyway, your margins are healthy and you want less paperwork.

It works badly if your buyers are GST-registered businesses (they get no input tax credit from your bills, so they may prefer regular suppliers), you buy a lot of taxable inputs (their GST becomes a cost), or you want to sell to other states.

Compare both options with real numbers from your books, using the GST calculator for the regular-scheme tax. The official notifications are on cbic-gst.gov.in.