GST Composition Scheme 2026 is an alternative method of levy of tax made for small taxpayers whose aggregate turnover in the preceding financial year is up to ₹1.5 crore (₹75 lakh for specified states). The scheme is available for FY 2026-27 and eligible taxpayers can opt for it through the GST portal.
The main aim of the composition scheme under GST is to bring simplicity and reduce the compliance cost for small taxpayers. It is optional and the eligible person opting to pay tax under this scheme pays tax at a fixed percentage of turnover every quarter, instead of paying tax at the normal rate.
Turnover limit under the scheme is ₹1.5 crore for most states and Union Territories. For specified states like Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand, the limit is ₹75 lakh. Service providers can also opt under Section 10(2A) of the CGST Act if their turnover is up to ₹50 lakh.
Composition tax rates are 1% for manufacturers and traders, 5% for restaurant services and 6% for service providers. These rates have stayed the same since FY 2019-20, and the September 2025 GST rate changes did not touch Section 10 or Rule 7 of the CGST Rules.
Composition Scheme under GST
Composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross the applicable limit. Official website for the composition scheme is cbic-gst.gov.in and the GST portal is gst.gov.in.
| Detail | Information |
|---|---|
| Scheme Name | GST Composition Scheme |
| Launched Under | Section 10 of CGST Act, 2017 and Rules 3 to 7 of CGST Rules, 2017 |
| Turnover Limit | ₹1.5 crore for most states, ₹75 lakh for specified states, ₹50 lakh for service providers |
| Tax Rates | 1% for manufacturers and traders, 5% for restaurants, 6% for service providers |
| Return Filing | Quarterly CMP-08 and annual GSTR-4 |
| Official Website | cbic-gst.gov.in and gst.gov.in |
Eligibility for Composition Scheme
A registered person can opt for the composition scheme if the aggregate turnover in the preceding financial year did not cross the applicable limit. The option is available only when all registrations under the same PAN opt together.
These persons cannot opt for the scheme:
- Service providers whose turnover crosses ₹50 lakh or other applicable limits.
- Suppliers of goods not leviable to GST, like alcoholic liquor for human consumption.
- Persons making inter-State outward supplies. Inter-State inward purchases are allowed.
- Casual taxable persons and non-resident taxable persons.
- Suppliers making supplies through an e-commerce operator that collects tax at source, for services. Since 1 October 2023, goods can be sold through e-commerce platforms if the supply is intra-State.
- Manufacturers of notified goods like ice cream, pan masala, tobacco products, aerated water and bricks.
Rates of Tax under Composition Scheme
Rates under the composition scheme are fixed by Rule 7 of the CGST Rules. The manufacturer rate is 1%, not the 2% that appears in older material. It was reduced with effect from 1 January 2018.
| Category of Registered Person | Rate of Tax |
|---|---|
| Manufacturers, other than manufacturers of notified goods (ice cream, pan masala, tobacco products, aerated water, bricks etc.) | 1% (0.5% Central tax plus 0.5% State tax) of the turnover |
| Restaurant Services | 5% (2.5% Central tax plus 2.5% State tax) of the turnover |
| Traders or any other supplier eligible for composition levy | 1% (0.5% Central tax plus 0.5% State tax) of the taxable turnover |
| Service providers under Section 10(2A) | 6% (3% Central tax plus 3% State tax) of the turnover |
How to Opt for Composition Scheme
Existing registered taxpayers can opt for the composition scheme before the start of the financial year. New applicants can give the option in Part B of FORM GST REG-01 at the time of registration.
STEP 1 - Log in to the GST portal at gst.gov.in with your credentials.
STEP 2 - Go to the Registration menu and select 'Application to Opt for Composition Levy'.
STEP 3 - File the intimation in FORM GST CMP-02 before the start of the financial year for which the option is exercised.
STEP 4 - Furnish the stock details in FORM GST CMP-03 and reverse input tax credit on existing stock through FORM GST ITC-03 within 60 days of the start of the financial year.
Compliance for Composition Taxpayers
Composition taxpayers pay tax quarterly through FORM GST CMP-08 by the 18th of the month following the quarter. The annual return is filed in FORM GSTR-4 by 30 June after the end of the financial year. Late filing attracts a fee of ₹50 per day (₹25 CGST plus ₹25 SGST) capped at ₹2,000, or ₹20 per day capped at ₹500 for a nil return, plus interest at 18% per annum.
Composition taxpayers cannot collect GST from customers and must issue a bill of supply instead of a tax invoice. The words 'composition taxable person' must be shown on the signboard at every place of business. Input tax credit is not available under the scheme.
Taxpayers with turnover up to ₹5 crore can also use the QRMP scheme for quarterly return filing with monthly tax payment. See the QRMP scheme for GST taxpayers for details.
Withdrawal from Composition Scheme
The option lapses automatically when the aggregate turnover during the financial year crosses the applicable limit. The taxpayer must then switch to the regular GST regime and file FORM GST CMP-04 within 7 days of the event. On exit, input tax credit on stock can be claimed through FORM GST ITC-01 within 30 days.
FAQ's
What is the turnover limit for GST Composition Scheme in 2026?
Turnover limit is ₹1.5 crore for most states and Union Territories. It is ₹75 lakh for specified states like Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand. Service providers can opt with turnover up to ₹50 lakh.
What are the tax rates under the composition scheme?
Manufacturers and traders pay 1% (0.5% CGST plus 0.5% SGST), restaurant services pay 5% (2.5% plus 2.5%) and service providers pay 6% (3% plus 3%) of turnover.
Can a composition taxpayer claim input tax credit?
No. Input tax credit is fully denied under Section 10(4) of the CGST Act for composition taxpayers.
Can composition taxpayers sell through e-commerce platforms?
Yes, for goods. Since 1 October 2023, composition taxpayers can sell goods through an e-commerce operator if the supply is intra-State. The restriction applies to services routed through operators that collect tax at source.