The composition scheme lets small businesses pay GST at a flat 1%, 5% or 6% of turnover and file quarterly instead of monthly — in exchange for no input tax credit and no inter-state sales. Check your eligibility and run the composition-vs-regular break-even below.
Turn on composition mode and ReadyBooks.ai adapts invoicing, tax computation, and return reminders to the scheme’s rules.
Set your composition rate (1% / 5% / 6%) and ReadyBooks.ai computes the composition tax on your turnover each quarter — no per-invoice GST math, no rate lookups.
A composition dealer issues a bill of supply, not a tax invoice, and cannot charge GST or pass on ITC. ReadyBooks.ai switches the document type and suppresses the tax breakup automatically when composition mode is on.
Composition filing is its own calendar: CMP-08 quarterly by the 18th of the next month, GSTR-4 annually by 30 April. ReadyBooks.ai tracks both and reminds you before each due date.
Composition is capped at ₹1.5 crore (goods) or ₹50 lakh (services). ReadyBooks.ai watches your running turnover and warns you as you approach the ceiling, so you can plan the switch to regular GST before you breach it.
When you cross the limit or opt out, ReadyBooks.ai moves you to regular GST invoicing — tax invoices, full rate-wise breakup, ITC, monthly/QRMP returns — without re-keying your customers or items.
Every bill of supply, CMP-08 statement and GSTR-4 return is stored with a complete trail, so a composition audit is a quick export rather than a scramble.
It is a genuinely good deal for some businesses — and a trap for others.
Quarterly CMP-08 instead of monthly returns, a flat rate on turnover, and no per-invoice GST. For a small local business the time saving alone is real.
You pay tax on turnover and cannot claim ITC on your purchases. If your business buys a lot of taxable inputs, the lost credit can outweigh the rate saving — the break-even calculator below shows where.
Composition dealers can only supply within their own state and cannot collect GST from customers. Your B2B buyers get no ITC, so they may resist your price.
Restaurants, local retailers and small service providers with thin input credit and mostly end-consumer customers are the natural fit for composition.
Under Section 10 of the CGST Act, eligible small taxpayers can opt to pay GST at a flat rate on turnover: 1% for traders and manufacturers (0.5% CGST + 0.5% SGST), 5% for restaurants not serving alcohol (2.5% + 2.5%), and 6% for service providers and mixed suppliers under the Section 10(2A) scheme (3% + 3%). The trade-off is no input tax credit and no inter-state outward supplies.
The turnover ceiling is ₹1.5 crore of aggregate turnover for suppliers of goods (₹75 lakh in the special-category north-eastern and hill states), and ₹50 lakh for the service-provider scheme. Composition dealers file a quarterly CMP-08 statement and an annual GSTR-4. ReadyBooks.ai applies these rates, limits and forms when you turn on composition mode — and the eligibility checker and break-even calculator below help you decide before you commit.
| Business type | Total rate | Split (CGST + SGST) | Basis |
|---|---|---|---|
| Traders / resellers of goods | 1% | 0.5% + 0.5% | s.10(1) |
| Manufacturers of goods | 1% | 0.5% + 0.5% | s.10(1) |
| Restaurants (no alcohol) | 5% | 2.5% + 2.5% | s.10(1) |
| Service providers / mixed suppliers | 6% | 3% + 3% | s.10(2A), Notif 02/2019-CT(R) |
Source: CGST Act Section 10(1) and 10(2A); service-provider scheme via Notification 02/2019-Central Tax (Rate).
| Item | Detail |
|---|---|
| Turnover limit — goods | ₹1.5 crore (₹75 lakh in special-category states) |
| Turnover limit — service-provider scheme | ₹50 lakh |
| Quarterly statement | CMP-08 — by the 18th of the month after the quarter |
| Annual return | GSTR-4 — by 30 April of the next financial year |
| Document issued | Bill of supply (not a tax invoice); GST not charged |
| Input tax credit | Not allowed |
| Inter-state outward supply | Not allowed |
Source: CGST Act s.10; CMP-08 / GSTR-4 due dates per the GST return calendar.
Answer four questions. This is a planning aid based on the Section 10 CGST rules — not tax advice. Confirm with your CA before opting in.
On these answers you appear to qualify for the composition scheme as a trader / reseller of goods. You would pay 1% of turnover, file CMP-08 quarterly and GSTR-4 annually, and cannot charge GST or claim input tax credit.
Composition saves on compliance but you pay tax on turnover with no input credit. Enter your numbers to see which scheme costs less in GST per year.
1% of turnover, no ITC. You cannot charge GST to customers.
18% output GST ₹7,20,000 less ₹1,20,000 ITC, collected from customers.
Composition is the lower GST outflow at these numbers, by ₹5,60,000 a year. But weigh the trade-offs: you cannot charge or collect GST, your B2B buyers get no ITC (so they may push back on price), and you cannot make inter-state sales. Composition fits B2C / local businesses with thin input credit. This is a simplified comparison for planning, not tax advice.