The GST Composition Scheme is meant for small businesses that want simpler compliance and a lower tax rate on turnover, with trade-offs. You cannot charge GST on invoices the usual way, and several supply types are restricted. Opt in only after you check eligibility for your FY.
Eligibility snapshot (verify live rules)
Typical conditions include:
- Aggregate turnover within the composition threshold for your category
- Not engaged in restricted supplies (many interstate outward supplies of goods are not allowed)
- Not supplying through e-commerce operators in cases where rules block composition
- Not a non-resident taxable person or other excluded categories listed in law
IMPORTANT
Thresholds and exclusions change by notification. Read the composition FAQ on gst.gov.in for the year you plan to opt in.
Pros and cons in plain words
| Composition helps when | Avoid composition when |
|---|---|
| Local retail / small turnover, few B2B ITC-hungry buyers | Most buyers need GST invoices to claim ITC |
| You want fewer monthly returns | You sell interstate regularly |
| You can absorb tax in pricing | You sell online via operators that block composition |
Documents and details
Ready to opt composition
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Step 1: Log in and open composition intimation
- Sign in at gst.gov.in.
- Go to Services → Registration / Application for opting for Composition (CMP-02 path; labels can vary slightly).
- Read the declarations about eligibility.
Step 2: File CMP-02
- Select the financial year for which you want composition.
- Confirm turnover and nature of business statements.
- Submit with EVC/DSC and download the acknowledgement.
File before the due date that applies for that FY. Late option windows are limited.
Step 3: After approval / intimation
- Stop issuing tax invoices for outward supplies under composition. Use bill of supply.
- Do not collect GST as a separate line from customers.
- Pay composition tax through the prescribed challan / CMP-08 schedule.
- File GSTR-4 when due for the year.
TIP
Tell regular B2B customers before you switch. Many will stop buying if they lose ITC.
Step 4: How to leave composition later
If turnover crosses the limit mid-year or you need to make restricted supplies, follow the portal process to withdraw / intimate and move to the regular scheme from the effective date rules specify. Keep books ready for stock valuation on transition days.
Restaurant and service categories
Composition has special rate structures for restaurants and certain service suppliers. Do not assume the goods retailer rate applies to your business. Read the rate table for your SAC / HSN mix before you file CMP-02.
Bookkeeping still matters
Composition reduces return frequency, not the need for basic books. You still need purchase and sales records, stock ideas for transition days, and proof for the turnover declaration. If you are close to the threshold, track turnover monthly so you can exit on time instead of discovering a breach months late.
Communicating the switch to customers
Print updated stationery that says bill of supply and does not show GSTIN tax breakup lines the old way. Marketplace and B2B customers may drop you after the switch. Prepare a short note for your top ten buyers explaining that you will no longer charge GST and that they cannot claim ITC on your supplies.
Realistic timelines
Most people lose time waiting on OTP issues, unclear scans, or a portal outage rather than on the core form itself. Build a small buffer into your plans. If a visa, loan, or registration appointment depends on this document, start at least one or two weeks earlier than the brochure minimum.
Keep a folder (phone and laptop) with:
- Application / acknowledgment PDF
- Fee receipt or UTR
- Identity proofs used in the upload
- Screenshots of status pages with dates visible
When a helpdesk asks for proof, you should be able to send it in one email without hunting through WhatsApp.
If the portal is down
Official sites in India often slow down on weekday evenings and near due dates. Try early morning, switch browsers, or use a less congested network. Prefer the gov.in domain even when a third-party site claims to be faster. If money was debited without an acknowledgment, wait for the stated reconciliation window and contact the listed support channel with the bank reference before you pay again.
After you finish
Update every dependent record that still shows old data: DigiLocker, employer HRMS, bank KYC, insurer, and any travel profile. A finished application that never propagates to the places you actually use will feel unfinished the next time you need it in a hurry.
Related Guides
Need more help?
For more information, check out our Business guides or try our GST Calculator.