GST Composition Scheme — 2025 Guide
A simplified tax scheme for small taxpayers with lower compliance and fixed tax rates on turnover.
Who can opt
- Registered suppliers of goods with aggregate turnover up to the notified threshold (commonly ₹1.5 crore; ₹75 lakh in certain states)
- Certain service providers via composition for services (Section 10(2A))/Notification 2/2019 — rate 6%
Not eligible
E-commerce suppliers, inter-state outward suppliers, manufacturers of ice cream, pan masala, tobacco, and service providers other than specified are ineligible.
Tax rates (indicative)
- Manufacturers: 1%
- Traders: 1%
- Restaurants (not alcohol): 5%
- Service providers under 10(2A): 6%
Key conditions
- No ITC allowed; cannot collect tax from customers (issue bill of supply)
- Pay tax on total turnover
- Display “composition taxable person” at premises and on bills
Compliance
- CMP-08: Quarterly statement and payment
- GSTR-4: Annual return by 30 April following FY
- Stock intimation on opting/withdrawal as applicable
How to opt in/out
Opt-in
File CMP-02 before the financial year start; file ITC-03 for reversal of ITC.
Opt-out
File CMP-04 when becoming ineligible; claim ITC on stock via ITC-01 if moving to regular scheme.
Pros and cons
- Lower compliance vs No ITC and limited eligibility
- Better for walk-in retail; less suitable for B2B buyers who want ITC
References
- Section 10 CGST Act; Rules 3–7; Notifications on thresholds and rates