What is the GST composition scheme?
Reviewed by Ranga & Company
GST composition scheme: The GST composition scheme lets small businesses pay GST at a low flat rate on turnover with simpler returns, in exchange for giving up input tax credit and inter-state sales.
At a glance
- Turnover limit
- ₹1.5 crore for goods (Rajasthan); ₹50 lakh for service providers
- Rates
- 1% traders and manufacturers, 5% restaurants, 6% service providers
- Returns
- CMP-08 quarterly (by 18th) and GSTR-4 annually (by 30 April)
- Cannot
- Claim ITC, collect GST from customers, or make inter-state supplies
- Invoice
- Bill of supply marked 'composition taxable person'
Is composition right for you?
It suits small retailers, kirana stores and restaurants selling mostly to consumers within Rajasthan, where customers don't need input tax credit. It is a poor fit if you sell to other businesses (they can't claim credit on your bills) or buy a lot of taxed inputs (you lose the credit).
How to opt in
- File CMP-02 on the GST portal before the start of the financial year (or at new registration)
- Display 'composition taxable person' on your signboard and bills
- Issue bills of supply instead of tax invoices
- Pay quarterly through CMP-08 and file GSTR-4 annually
Common mistakes
- Making an inter-state sale, which is not allowed under composition
- Collecting GST from customers on the bill
- Crossing the turnover limit during the year without moving to normal registration
Frequently asked questions
What is the composition scheme limit in Rajasthan?
₹1.5 crore of aggregate turnover for goods suppliers and restaurants, and ₹50 lakh for service providers.
Can a composition dealer sell outside Rajasthan?
No. Composition dealers cannot make inter-state outward supplies of goods.
Can a composition dealer claim input tax credit?
No. That is the main trade-off for the lower rate and simpler returns.
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