What this scheme offers
Instead of raising detailed tax invoices and filing monthly returns under standard GST, a composition dealer pays a fixed percentage of turnover — generally 1% for traders and manufacturers, 5% for restaurants, and 6% for eligible service providers. Compliance drops sharply: one quarterly payment (Form CMP-08) and one annual return (GSTR-4), instead of monthly GSTR-1 and GSTR-3B filings. The trade-off is that composition dealers cannot claim Input Tax Credit (ITC) on their purchases, cannot make inter-state outward supplies, and must issue a Bill of Supply rather than a tax invoice.
Who is eligible
- Manufacturers and traders with aggregate annual turnover up to ₹1.5 crore (₹75 lakh in Himachal Pradesh and the North-Eastern special category states).
- Service providers (including mixed suppliers) with aggregate annual turnover up to ₹50 lakh.
- Aggregate turnover is calculated PAN-wide, across all your business locations, not per GSTIN.
- Businesses must opt in voluntarily — it is not automatic on registration.
Not eligible: businesses making inter-state outward supplies, e-commerce sellers required to collect tax at source, and manufacturers of certain notified goods (like ice cream, pan masala and tobacco products).
Documents required
- Existing GST registration (GSTIN)
- PAN of the business
- Turnover records for the preceding financial year
- Bank account details linked to the GST registration
How to opt in
- Log in to the GST portal (gst.gov.in) with your existing GSTIN credentials.
- Navigate to Services → Registration → Application to Opt for Composition Levy, and file Form CMP-02.
- New registrants can select the composition option directly at the time of GST registration.
- Once opted in, file Form CMP-08 every quarter to declare turnover and pay tax, and Form GSTR-4 annually.
- If your turnover crosses the applicable limit during the year, you must notify the authorities within 7 days and switch to regular GST.