GST Composition Scheme Eligibility Checker — Section 10 CGST Act
The GST Composition Scheme under Section 10 of CGST Act lets small businesses with turnover up to ₹1.5 crore (₹75 lakh for special states) pay GST at just 1–6% instead of standard 5–28% rates. You file quarterly returns instead of monthly. But you can’t claim ITC, make interstate supplies, or sell on e-commerce platforms. Use this free tool to check your eligibility and see how much tax you save.
Check Your Eligibility & Tax Savings
How to Use the GST Composition Scheme Eligibility Checker
This free tool performs a comprehensive 7-point eligibility check and calculates your potential tax savings under the composition scheme. Follow these steps:
Step 1 — Select Your Business Type
Choose whether you are a trader, manufacturer, restaurant, or service provider. This determines the applicable composition levy rate and specific eligibility rules. Restaurants have a separate category because they attract a different tax rate of 5% under the scheme.
Step 2 — Choose Your State Category
Select whether your business is registered in a general state or a special category state (North-Eastern states, Himachal Pradesh, Uttarakhand). Special category states have lower turnover limits of ₹75 lakh versus ₹1.5 crore for general states.
Step 3 — Enter Turnover Details
Provide your aggregate annual turnover (calculated PAN-wise, not GSTIN-wise) and estimated quarterly turnover for the savings comparison. The tool checks your turnover against the applicable limit automatically.
Step 4 — Answer Restriction Checks
The tool verifies whether your business activities fall within composition scheme rules — interstate supplies, e-commerce sales, excluded goods (ice cream, pan masala, tobacco), and casual/non-resident status. Each check maps directly to Section 10 restrictions under the CGST Act.
Step 5 — View Results
Get an instant eligibility verdict with a detailed checklist, applicable composition tax rate, and a side-by-side comparison showing quarterly and annual tax savings versus regular GST filing.
CA Tip: Before opting for composition, assess whether your buyers are mostly registered businesses (B2B) or end consumers (B2C). B2B buyers cannot claim ITC on purchases from composition dealers, which may make your products less attractive. The ICAI recommends composition primarily if 80%+ of your sales are B2C.
What Is the GST Composition Scheme Under Section 10?
The GST Composition Scheme is a simplified taxation scheme introduced under Section 10 of the Central Goods and Services Tax (CGST) Act, 2017 for small taxpayers. It allows eligible businesses to pay GST at a flat percentage of their turnover instead of the item-wise GST rates (5%, 12%, 18%, or 28%) that apply under the regular scheme.
The primary objective is to reduce the compliance burden for micro and small enterprises by offering lower tax rates, fewer return filings, and simpler record-keeping. Instead of filing monthly GSTR-1 and GSTR-3B returns, composition dealers only file a quarterly CMP-08 statement and an annual GSTR-4 return.
According to the Ministry of MSME, over 6.3 crore MSMEs operate in India, and a majority have turnover below ₹1.5 crore. The Composition Scheme allows these businesses to focus on operations rather than spending disproportionate resources on GST compliance.
Section 10(1) vs Section 10(2A) — Two Tracks
Under Section 10(1), manufacturers and traders with aggregate turnover up to ₹1.5 crore can opt at 1% GST. Restaurants not serving alcohol can opt at 5%. Under Section 10(2A), introduced via the CGST Amendment Act 2018, service providers with turnover up to ₹50 lakh can opt at 6% GST rate.
Additionally, businesses under Section 10(1) can supply services up to 10% of their turnover in the preceding year or ₹5 lakh, whichever is higher. This provides flexibility for ancillary services without losing composition eligibility.
Key Advantages
Lower tax rates (1–6% vs 5–28%), quarterly filing instead of monthly (5 filings/year vs 25+), simpler record-keeping, no requirement for detailed HSN-wise reporting, and better cash flow management. The scheme is voluntary and can be opted in or out at the beginning of each financial year.
Key Disadvantages
No ITC on purchases, cannot issue tax invoices (only Bill of Supply), restricted to intra-state supplies, buyers cannot claim ITC on purchases from composition dealers, cannot sell through e-commerce operators, and tax must be paid from own pocket. These restrictions make the scheme unsuitable for businesses with significant B2B operations or high input costs.
GST Composition Scheme Tax Rates — FY 2025-26
The composition levy rates are split equally between CGST and SGST/UTGST. Here is the complete rate table as per Rule 7 of the CGST Rules:
| Business Category | CGST | SGST/UTGST | Total GST | Turnover Limit |
|---|---|---|---|---|
| Traders (goods) | 0.5% | 0.5% | 1% | ₹1.5 Cr / ₹75 L* |
| Manufacturers (goods) | 0.5% | 0.5% | 1% | ₹1.5 Cr / ₹75 L* |
| Restaurants (no alcohol) | 2.5% | 2.5% | 5% | ₹1.5 Cr / ₹75 L* |
| Service Providers — Sec 10(2A) | 3% | 3% | 6% | ₹50 Lakh |
* ₹75 lakh for special category states (NE states, Himachal Pradesh, Uttarakhand)
Quarterly Tax = Taxable Turnover × Composition Rate
Annual Tax = Sum of 4 Quarterly Payments
Example (Trader, ₹1 Cr turnover):
Quarterly Tax = ₹25,00,000 × 1% = ₹25,000
Annual Tax = ₹25,000 × 4 = ₹1,00,000
vs Regular @ 18% = ₹18,00,000 → ₹17 lakh savings!
Who Can and Cannot Opt for Composition Scheme?
Eligible Businesses
- Traders of goods with aggregate annual turnover up to ₹1.5 crore (₹75 lakh in special category states)
- Manufacturers of goods (excluding ice cream, pan masala, tobacco, aerated water) within the same turnover limits
- Restaurants not serving alcohol, within the same turnover limits
- Service providers with turnover up to ₹50 lakh under Section 10(2A)
- Mixed suppliers where services do not exceed 10% of turnover or ₹5 lakh
Ineligible Businesses — Section 10(2)
- Businesses making interstate outward supplies
- Suppliers via e-commerce operators (TCS under Section 52)
- Manufacturers of ice cream, pan masala, tobacco, aerated water, fly ash bricks
- Casual taxable persons and non-resident taxable persons
- Suppliers of non-taxable goods like alcohol for human consumption
- Businesses where multiple GSTINs under same PAN don’t all opt together
PAN-Level Rule: If a business has multiple GST registrations under the same PAN, ALL must collectively opt for composition. You cannot mix composition and regular under one PAN. This is per the proviso to Section 10(2) of the CGST Act.
Compliance Requirements for Composition Dealers
While the scheme reduces compliance burden, dealers must fulfil key obligations under GST law:
CMP-08 — Quarterly Statement
File Form GST CMP-08 for each quarter by the 18th of the following month. This declares taxable turnover and tax payable. Example: April–June quarter is due by 18th July.
GSTR-4 — Annual Return
File by 30th April of the next financial year. Consolidates the full year’s data including inward supplies under reverse charge and purchases from unregistered persons.
Bill of Supply
Must display: “Composition Taxable Person, Not Eligible to Collect Tax on Supplies.” This notice must also appear on all signboards at business premises.
Opting In and Out
Opt in: File GST CMP-02 before 31st March. New registrations select composition in Form GST REG-01. Stock intimation within 30 days. Opt out: File GST CMP-04 within 7 days, then GST ITC-01 within 30 days to claim ITC on closing stock.
Expert Tip: If approaching the ₹1.5 crore limit mid-year, plan your transition proactively. Maintain detailed stock records for maximum ITC recovery via ITC-01. Our CA team can help — talk to a CA now.
Composition Scheme vs Regular GST — Comparison
| Parameter | Composition | Regular GST |
|---|---|---|
| Tax Rate | 1% – 6% on turnover | 5% – 28% on supply value |
| Input Tax Credit | Not available | Available |
| Invoice Type | Bill of Supply only | Tax Invoice with GST |
| Return Filing | Quarterly CMP-08 + Annual GSTR-4 | Monthly GSTR-1 + 3B + Annual GSTR-9 |
| Interstate Supply | Not allowed | Allowed |
| E-commerce Sales | Not allowed | Allowed |
| Filings Per Year | 5 | 25+ |
| Buyer ITC | Buyer cannot claim | Buyer can claim |
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