As of 2026, here are the primary benefits and rules for opting into this scheme:
1. Lower Tax Rates
Instead of the standard GST slabs (like 12% or 18%), you pay a small, fixed percentage of your total turnover.
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Manufacturers & Traders: 1%
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Restaurants (Non-alcoholic): 5%
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Service Providers: 6%
2. Reduced Compliance Burden
If you hate filing returns every month, this is your best friend.
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Fewer Returns: You only need to file one annual return (GSTR-4).
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Quarterly Payments: You pay your taxes once every three months using a simple statement (CMP-08), rather than every month.
3. Simplified Record-Keeping
Regular GST taxpayers have to maintain detailed “tax invoices” for every single sale. Under the composition scheme, you issue a Bill of Supply. You don’t need to track every tiny detail for Input Tax Credit (ITC) because you aren’t eligible to claim it anyway.
4. Higher Liquidity
Because the tax rates are so low (e.g., 1% for traders), you keep more cash in your business throughout the month. This extra “working capital” can be vital for small operations.
- Your aggregate turnover in the previous financial year must meet these limits:
- Manufacturers & Traders -Up to ₹1.5 Crore
- Special Category States – Up to ₹75 Lakh
- Service Providers – ₹50 Lakh
While it’s simpler, there are a few trade-offs:
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No Input Tax Credit: You cannot claim credit for the GST you pay on your purchases.
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No Inter-State Sales: Generally, you can only sell within your own state.
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No Tax Collection: You cannot charge GST to your customers; the tax you pay comes directly out of your pocket/turnover.