Is composition right for you?
Composition works best for businesses that sell mostly to consumers within the state, have low input costs, and value simpler compliance. It works badly for businesses selling to GST-registered customers — who can't claim credit on a composition dealer's bill of supply — or with significant purchases on which input tax credit would otherwise be available.
| Point | Composition | Regular |
|---|---|---|
| Tax charged to customer | No — bill of supply | Yes — tax invoice |
| Input tax credit | Not available | Available |
| Inter-state sales of goods | Not allowed | Allowed |
| Returns | CMP-08 quarterly, GSTR-4 yearly | GSTR-1 and GSTR-3B monthly or quarterly |
Who can't opt in
- Businesses making inter-state outward supplies of goods.
- Suppliers of goods not taxable under GST.
- Manufacturers of notified goods such as ice cream, pan masala and tobacco products.
- Casual and non-resident taxable persons.
- Service providers above the ₹50 lakh limit (other than restaurants).
Documents required
- GST registration details, or the new registration application.
- Turnover for the previous year.
- Details of stock held on the date of opting in (for existing taxpayers).
- Sales and purchase records each quarter.
How we handle it
Compare the options
Tax cost and customer impact under composition and regular GST.
Opt in
CMP-02 before the year starts, or in REG-01 for a new registration.
Quarterly CMP-08
Tax paid by the 18th after each quarter.
Annual GSTR-4
By 30 June after the year.
Watch the limit
If turnover crosses the limit, the business moves to regular GST.
Practical notes from our engagements
- Tax collected on bills. A composition dealer can't charge GST. Bills of supply must say so.
- Crossing the limit mid-year. Once turnover crosses the limit, the business must switch to regular GST.
- Signboard requirement forgotten. Composition dealers must mention "composition taxable person" on their signboard and bills.
How we handle composition
We compare composition with regular GST on your actual numbers, opt in if it makes sense, and file CMP-08 and GSTR-4 on time — watching the turnover limit through the year.
Related services
Frequently asked questions
What is the turnover limit for the composition scheme?
₹1.5 crore for manufacturers, traders and restaurants (₹75 lakh in special category states), and ₹50 lakh for service providers.
What are the composition rates?
1% for manufacturers and traders, 5% for restaurants not serving alcohol, and 6% for service providers.
When is CMP-08 due?
By the 18th of the month after each quarter.
When is GSTR-4 due?
By 30 June after the end of the financial year.
Can a composition dealer claim input tax credit?
No.
Can a composition dealer sell to other states?
Not goods. Inter-state outward supplies of goods aren't allowed under composition.