Calculate GST under the Composition Scheme for small businesses in India. For traders, manufacturers, and restaurants with turnover up to Rs 1.5 crore.
Estimate your quarterly GST under the Composition Scheme for small businesses.
Quarterly composition tax
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CGST portion
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SGST portion
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Annual tax estimate
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Your breakdown
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How composition scheme tax is calculated
Composition tax is a flat percentage of the total turnover, not the value added. A trader with Rs 10 lakh quarterly turnover pays Rs 10,000 in composition tax (1 percent), split equally between CGST (Rs 5,000) and SGST (Rs 5,000). This is much simpler than regular GST, where you must track input tax credit, maintain detailed invoice records, and file monthly returns. The trade-off is that you cannot recover GST paid on your purchases, so the net cost depends on how much input tax credit you would have claimed under the regular scheme.
When composition scheme is financially beneficial
Composition is most beneficial for businesses with low input costs relative to turnover, meaning they purchase little and the input tax credit would be small anyway. A fruit and vegetable trader, a papad manufacturer buying agricultural raw materials, or a local restaurant sourcing fresh ingredients all have limited input tax credits. For businesses with high input costs like machinery or manufactured goods, the inability to claim ITC under composition may actually make it more expensive than regular GST, so a comparison calculation is needed before opting in.
Crossing the threshold: when to switch
If your aggregate annual turnover crosses Rs 1.5 crore (or Rs 75 lakh in special category states), you must migrate to regular GST. The migration must happen from the day the threshold is breached. If you anticipate approaching the limit, plan in advance: you will need to start issuing tax invoices, registering for a complete accounting system, and filing monthly GSTR-1 and GSTR-3B. It is wise to consult a GST practitioner before the crossover to ensure a smooth transition and avoid penalties for non-compliance.
Frequently asked questions
Who is eligible for the GST Composition Scheme?
Businesses with aggregate annual turnover up to Rs 1.5 crore (Rs 75 lakh for special category states) can opt for the Composition Scheme. The scheme is available to traders, manufacturers, and restaurants. It is not available to service providers except for a separate CTP scheme for service providers with turnover up to Rs 50 lakh at 6 percent GST. Businesses dealing in interstate supply, e-commerce operators, and manufacturers of notified goods like ice cream, pan masala, or tobacco are not eligible.
What are the composition scheme tax rates?
As of 2024-25, the composition scheme rates are: 1 percent of turnover for traders (0.5 percent CGST plus 0.5 percent SGST), 2 percent for manufacturers (1 percent CGST plus 1 percent SGST), and 5 percent for restaurants not serving alcohol (2.5 percent CGST plus 2.5 percent SGST). Composition taxpayers cannot claim input tax credit on purchases, and the tax is paid from their own pocket rather than collected from customers. They must display a board stating they are composition taxpayers.
Can a composition dealer issue a GST invoice?
No. A composition dealer cannot collect GST from customers or issue a tax invoice. They must issue a bill of supply instead. This means their B2B customers cannot claim input tax credit on purchases from them, which is a disadvantage when dealing with GST-registered businesses. However, for B2C businesses like small retailers and restaurants serving individual consumers who do not need ITC, this is not a problem and the simpler compliance makes composition attractive.
What is the return filing requirement under composition scheme?
Composition dealers file CMP-08, a quarterly statement of self-assessed tax, by the 18th of the month following the quarter. They also file an annual return in GSTR-4 by 30 April of the next financial year. This is significantly simpler than the monthly GSTR-1 and GSTR-3B required for regular taxpayers, which is one of the major benefits of opting for composition. Failure to file returns on time attracts a late fee of Rs 200 per day (Rs 100 CGST plus Rs 100 SGST).