Conditions and restrictions for composition levy
Rule 5 of the CGST Rules
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Conditions for staying in composition: not a casual or non-resident taxable person, no inter-State outward supplies, no supply through an e-commerce operator required to collect TCS (relaxed for goods from 1 October 2023), no exempt or non-GST goods dealing beyond what section 10 allows, tax on reverse-charge inward supplies paid at normal rates, and every invoice marked ‘composition taxable person, not eligible to collect tax on supplies’.
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1,590 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
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(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely: –
(a) he is neither a casual taxable person nor a non-resident taxable person;
(b) the goods held in stock by him on the appointed day have not been purchased in the course of inter-State trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State, where the option is exercised under sub-rule
(1) of rule 3 ;
(c) the goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under sub-section
(4) of section 9 ;
(d) he shall pay tax under sub-section
(3) or sub-section
(4) of section 9 on inward supply of goods or services or both;
(e) he was not engaged in the manufacture of goods as notified under clause
(e) of sub-section
(2) of section 10 , during the preceding financial year;
(f) he shall mention the words "composition taxable person, not eligible to collect tax on supplies" at the top of the bill of supply issued by him; and
(g) he shall mention the words "composition taxable person" on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
(2) The registered person paying tax under section 10 may not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and these rules.
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Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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