GST Composition vs Regular Scheme — Limits, Rates & Returns

Composition scheme vs Regular scheme at a glance

Feature	Composition scheme	Regular scheme
Turnover limit	₹1.5 crore (₹75 lakh in certain special-category states); ₹50 lakh for service providers	No limit
Tax rate	1% traders & manufacturers, 5% restaurants, 6% services (on turnover)	Normal GST rate on each supply
Input tax credit	Not available	Available
Charge GST to customers	No — issue a bill of supply	Yes — issue a tax invoice
Inter-state outward supply	Not allowed	Allowed
Exports	Not allowed	Allowed (with LUT, without IGST)
Returns	CMP-08 quarterly + GSTR-4 annually	GSTR-1 and GSTR-3B monthly or quarterly (QRMP) + GSTR-9 annually
Compliance effort	Low	Higher
Who prefers it	Local B2C sellers	B2B suppliers, inter-state sellers, exporters

Composition may suit you if…

You sell mainly to consumers in your own state
Your turnover is below the limit
Your purchases carry little GST you could claim back
You want quarterly payments and simple records

Regular GST may suit you if…

Your customers are GST-registered businesses
You sell to other states or export
You buy a lot of taxable inputs and want credit
You plan to grow beyond the composition limit soon

Who can't opt for composition

Composition isn't available to businesses making inter-state outward supplies, non-resident taxable persons, casual taxable persons, and manufacturers of certain notified goods such as ice cream, pan masala and tobacco products. Service providers can use the separate composition option for services only within the ₹50 lakh limit.

Composition dealers may supply goods through e-commerce marketplaces within their own state, subject to conditions; inter-state sales remain barred.

How to opt in or out

Existing taxpayers opt in by filing Form CMP-02 before the start of the financial year. New applicants can choose composition while registering. You can withdraw at any time by filing CMP-04, and you must move to the regular scheme once turnover crosses the limit.

The hidden cost: input tax credit

Under composition, the GST you pay on purchases becomes a cost. If your inputs carry 18% GST and your margins are thin, regular registration with full input credit can be cheaper overall — even though the headline rate is higher.

Frequently asked questions

Can a composition dealer sell on Amazon or Flipkart?

Yes, for supplies of goods within the same state, subject to conditions. Inter-state supplies through marketplaces are not allowed under composition.

What is the due date for CMP-08?

CMP-08 is filed quarterly by the 18th of the month after the quarter ends. GSTR-4 is the annual return, due by 30 April after the financial year.

Can my customers claim input credit on my bill?

No. A composition dealer issues a bill of supply without GST, so buyers can't claim credit — which is why B2B customers often prefer regular suppliers.

What happens if I cross ₹1.5 crore turnover?

You must move to the regular scheme by filing the withdrawal form within 7 days of crossing the limit, and start issuing tax invoices.

This guide is general information, not legal or tax advice. Laws and rates change; confirm the position for your case with a professional. See our disclaimer.

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