Composition suits small shops selling mostly to consumers within their state: you pay a flat 1% of turnover (as a trader), file fewer returns and issue a bill of supply. But you cannot charge GST, cannot claim input tax credit and cannot sell to other states — so B2B sellers usually do better under regular GST.
What is the composition scheme?
A simpler way to pay GST for small businesses. Instead of collecting GST on each bill and claiming credit on purchases, you pay a small fixed percentage of your turnover from your own pocket.
Side by side
| Composition | Regular GST | |
|---|---|---|
| Turnover limit (goods) | Up to ₹1.5 crore (₹75 lakh in some states) | No limit |
| Tax rate | 1% for traders, 5% for restaurants | Item rate: 0%, 5%, 18% or 40% |
| Charge GST on bills? | No — issue a bill of supply | Yes — tax invoice |
| Input tax credit | Not allowed | Allowed |
| Sales to other states | Not allowed | Allowed |
| Returns | CMP-08 quarterly, GSTR-4 yearly | GSTR-1 and GSTR-3B monthly or quarterly |
Limits and rates as of November 2026. Check the GST portal or your CA before switching.
A rupee example
A kirana sells ₹60 lakh a year to walk-in customers. Under composition it pays 1% — ₹60,000 a year — and files four short returns. Under regular GST it would collect GST from customers and claim credit on purchases, but file many more returns.
Now a wholesaler sells ₹60 lakh to other shops. Its buyers want a tax invoice so they can claim credit. Under composition it cannot give one — so buyers may go elsewhere. Regular GST suits it better.
Quick way to choose
- Mostly selling to consumers, within your state, turnover under the limit → composition is worth a look.
- Selling to businesses, or to other states → regular GST.
- Buying a lot of taxed goods and want the credit back → regular GST.
The bill of supply
A composition shop must issue a bill of supply, not a tax invoice, and print the line "Composition taxable person, not eligible to collect tax on supplies". No GST is shown on it.
In Billman
Turn on "Composition scheme (Bill of Supply)" in Settings ▸ Document settings ▸ GST Scheme. Billman then charges no GST, prints BILL OF SUPPLY and adds the composition declaration on every bill.
🧮Compare the tax with your own numbersFree GST calculatorOpen free tool →✨In BillmanBills of supply for composition shopsSee how it works →FAQ
Can a composition dealer charge GST on the bill?
No. They issue a bill of supply without GST and pay the composition tax themselves.
Can a composition dealer claim input tax credit?
No. That is the main trade-off for the lower rate and fewer returns.
Can I switch from composition to regular GST?
Yes, by filing the option on the GST portal. Talk to your CA about the timing.
Bill of supply or tax invoice — Billman does both
7 days free. We set it up and move your data — free.
