GST Composition Scheme for Goods

Q: Who is eligible for the GST Composition Scheme for goods?

Traders and manufacturers with aggregate turnover up to ₹1.5 crore are eligible. Businesses making inter-state supplies or supplying services are not eligible.

Q: What is the GST rate under the composition scheme for goods?

Manufacturers pay 1% and traders pay 0.5% of total turnover, making computation straightforward compared to the regular scheme.

Q: Can a composition dealer claim Input Tax Credit?

No. Composition dealers cannot claim ITC on purchases. This is the key trade-off of the scheme and should be evaluated carefully.

Q: What happens if a composition dealer's turnover exceeds ₹1.5 crore?

The dealer must exit the composition scheme and register as a regular taxpayer from the day turnover exceeds the threshold.

Q: Can a composition dealer make inter-state sales?

No. Inter-state outward supplies are not permitted under the composition scheme. The regular GST scheme is mandatory for inter-state sellers.

Simplified Tax Compliance for Small Traders and Manufacturers Under the Composition Scheme

The GST Composition Scheme is a simplified tax compliance option designed for small businesses dealing in goods. Eligible taxpayers pay a fixed percentage of their turnover as GST instead of computing tax on each transaction, significantly reducing compliance burden and return filing obligations.

Businesses with aggregate annual turnover up to ₹1.5 crore can opt for the composition scheme, paying tax at a flat rate of 1% (manufacturers) or 0.5% (traders) of turnover. This scheme eliminates the need for invoice-level GST computation, multiple returns, and complex reconciliation — though it also restricts input tax credit claims. We assist businesses in evaluating whether the composition scheme is advantageous, filing the opt-in application, and maintaining compliance thereafter. See also our services for standard GST registration and amendments to GST registrations.

Our Composition Scheme Services

Eligibility Assessment

Detailed evaluation of whether the composition scheme is beneficial for your business based on turnover, input purchases, and customer type (B2B vs B2C).

Opt-In Filing (CMP-02)

Filing of Form GST CMP-02 on the GST portal to opt into the composition scheme for the next financial year before the prescribed deadline.

Quarterly Return Filing (CMP-08)

Preparation and filing of quarterly CMP-08 statements for payment of composition tax on a timely basis to avoid interest and late fees.

Annual Return (GSTR-4)

Filing of GSTR-4 annual return for composition dealers, reconciling quarterly payments with annual turnover and tax liability.

Scheme Exit Support

Assistance with opting out of the composition scheme when turnover exceeds the threshold or regular scheme becomes more beneficial.

Bill of Supply Compliance

Guidance on issuing Bills of Supply (not tax invoices) under the composition scheme and maintaining proper books for audit purposes.

Benefits of the GST Composition Scheme

Pay GST at a flat, low rate — no transaction-level tax computation required
File only one quarterly statement (CMP-08) and one annual return (GSTR-4)
Reduced recordkeeping burden suitable for small traders and manufacturers
Improved cash flow as tax is based on turnover, not on outward tax minus ITC
No requirement to issue tax invoices — Bills of Supply suffice
Lower overall compliance cost compared to the regular GST scheme

Frequently Asked Questions

Who is eligible for the GST Composition Scheme for goods?

Traders and manufacturers dealing in goods with aggregate annual turnover up to ₹1.5 crore are eligible. Businesses making inter-state supplies, supplying non-taxable goods, or engaged in the supply of services (except restaurant services) are not eligible for the composition scheme.

What is the GST rate under the composition scheme for goods?

Manufacturers pay 1% of turnover as GST (0.5% CGST + 0.5% SGST). Traders pay 0.5% (0.25% CGST + 0.25% SGST). These rates apply on the total turnover, not on the value-added portion, making them simple to compute.

Can a composition dealer claim Input Tax Credit?

No. Composition dealers cannot claim Input Tax Credit on their purchases. This is a key trade-off of the scheme — while compliance is simpler, the tax paid on inputs cannot be offset against output tax liability. Businesses with significant input purchases should evaluate this carefully before opting in.

What happens if a composition dealer's turnover exceeds ₹1.5 crore?

The dealer must withdraw from the composition scheme from the day the turnover exceeds ₹1.5 crore and register as a regular taxpayer. All obligations of a regular dealer, including GSTR-1 and GSTR-3B filings and tax invoice issuance, apply from that date.

Can a composition dealer make inter-state sales?

No. Composition dealers are restricted from making inter-state outward supplies. If your business involves sales across state borders, the regular GST scheme is mandatory. However, inter-state purchases are permitted under the composition scheme.

Find Out If the Composition Scheme Works for You

Expert evaluation and end-to-end compliance support for GST composition dealers.