GST Composition Scheme — Who Can Opt, the 1% / 5% / 6% Rates, the ₹1.5 Crore Limit, Quarterly CMP-08, Annual GSTR-4 (Due 30 June), NIL Filing and When the Scheme Stops Making Sense

Section 10 of the CGST Act lets a small taxpayer pay GST at a flat percentage of turnover instead of charging GST on each sale and claiming input credit. The trade-offs are fixed: no tax is collected from customers (you issue a bill of supply, not a tax invoice), no input tax credit is available on purchases, no inter-state outward supplies of goods are allowed, and the words 'composition taxable person, not eligible to collect tax on supplies' must appear on every bill and signboard. Reverse-charge purchases are still taxed at the normal rates.

• •Not allowed: inter-state outward supplies of goods; supplies through an e-commerce operator that collects TCS (a composition dealer may sell intra-state through e-commerce since 1 October 2023, but not inter-state); manufacturers of ice cream and other edible ice, pan masala, tobacco products, aerated water, fly-ash bricks and building bricks; casual and non-resident taxable persons; suppliers of non-taxable goods.
• •All GSTINs under one PAN must opt together — a PAN with a regular registration in one state cannot hold a composition registration in another.
• •The limit is aggregate turnover on the PAN across India in the previous year (and the current year): ₹1.5 crore for goods (₹75 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand), ₹50 lakh for the services scheme.
• •Exit: the scheme lapses on the day turnover crosses the limit or an ineligible supply is made; file CMP-04 within 7 days and start issuing tax invoices. Credit on stock as on the exit date can be claimed through ITC-01 within 30 days.
• •Voluntary switch to composition: CMP-02 before the start of the financial year (by 31 March) and ITC-03 to reverse credit on stock within 60 days; a new registrant opts in the registration form itself.

1. 1NIL CMP-08 or NIL GSTR-4 (no supplies, no reverse-charge purchases, no tax due): log in → Returns → select the period → tick 'File NIL' → verify with EVC or DSC. A NIL CMP-08 can also be filed by SMS: NIL C8 GSTIN quarter.
2. 2GSTR-4 with data: Table 4A/4B need inward supplies from registered suppliers, which are pre-filled from suppliers' GSTR-1 via the GSTR-4A statement; add unregistered purchases (4C) and imports (4D); Table 6 carries outward supplies at the composition rate; Table 8 shows tax paid in CMP-08 and any balance.
3. 3Late fee for GSTR-4: ₹50 a day (₹20 for NIL), capped at ₹2,000 (₹500 for NIL). CMP-08 attracts interest at 18% on late payment. From 1 August 2025 a GSTR-4 more than three years past its due date cannot be filed at all.
4. 4A composition taxpayer still files GSTR-1? No — but must reply to any ASMT-10 scrutiny notice comparing CMP-08 turnover with e-way bills, TDS/TCS data and bank credits.

Composition wins when input GST on purchases is small compared with the 1% (or 5%/6%) on turnover and customers do not need input credit — a retailer buying from unregistered or exempt sources, a small restaurant, a local repair service. Regular GST wins when the customers are businesses that want a tax invoice, when purchases carry 18% GST that would otherwise be lost, when goods are sold inter-state or online across states, or when turnover is heading past ₹1.5 crore. Since the 22 September 2025 rate rationalisation most goods sit at 5% or 18%, which makes the input-credit loss under composition larger for anyone buying taxed inputs — re-run the comparison every year.