The composition scheme

How it works

Under the scheme you pay tax at a fixed rate on your turnover, and the rate depends on the kind of business. You do not work out tax invoice by invoice, and your compliance is lighter.

Only some businesses can choose it. The turnover limit and the list of eligible businesses are set by notification, and they differ for goods and for services. Check the portal before you apply.

What changes for you

• You issue a bill of supply, not a tax invoice, and you do not show tax on it.
• You cannot collect GST from your buyers as a separate amount.
• You cannot claim input tax credit on your purchases.
• You file a quarterly statement with your tax payment and an annual return, in place of the monthly returns.
• Your buyers cannot claim credit on what you sell them, which can matter to businesses that buy from you.

Sales to another state are not allowed under the scheme. For sales through online platforms, check the current position on the portal.

Choosing it or leaving it

You opt in on the GST portal, and you can leave the scheme when you no longer qualify or prefer to. Once your turnover goes above the limit you must leave, and you then charge tax and can claim credit like any other registered business. Ask your accountant which route is better for your business.

Official sources

• GST portal: registration user guide
• CGST Act, 2017 (CBIC consolidated copy)
• CGST Rules, 2017, Part A (CBIC)

Related guides

• GST registration
• GST invoice rules

Questions