What Is the GST Composition Scheme, and Who Can Opt for It?
GSTZone Desk · Updated 2026
Short answer
Composition is a simplified GST scheme for small businesses, letting them pay a flat, low tax rate on turnover instead of standard GST — available to goods suppliers and restaurants up to ₹1.5 crore turnover (₹75 lakh in a few special category states), and to other service providers up to ₹50 lakh under a separate scheme.
In detail
Composition trades away some flexibility for a lot of simplicity. Instead of tracking every sale’s GST rate, filing detailed monthly returns, and maintaining full input tax credit records, a composition dealer pays a single flat percentage of total turnover, files a much simpler quarterly return, and skips ITC entirely — both claiming it and passing it on to customers.
The main goods/restaurant composition scheme under Section 10 covers businesses up to ₹1.5 crore turnover in the preceding year (₹75 lakh in specified special category states). A separate, later scheme extended a similar flat-rate option to other service providers, capped at ₹50 lakh turnover, at a 6% rate.
Certain businesses are excluded regardless of turnover: manufacturers of specific notified goods (like ice cream, pan masala, and tobacco products), anyone making inter-state outward supplies, casual or non-resident taxable persons, and — relevant to an earlier question in this series — sellers required to collect TCS through an e-commerce operator.
GSTZone tip
Composition looks attractive purely on the tax rate, but weigh it against your actual customer base first — if most of your buyers are GST-registered businesses wanting ITC, they generally can’t claim any credit on a composition dealer’s bill, which can quietly cost you business.
Related questions
Can a service provider under ₹50 lakh always choose composition?+
Only if they don’t fall into an excluded category (like specific notified supplies) — the ₹50 lakh services composition scheme has its own separate conditions distinct from the main goods scheme.
What tax rate does a composition trader pay?+
A trader (not manufacturer, not restaurant) under composition pays 1% of turnover; manufacturers pay 1%; restaurants pay 5%; and the separate services composition scheme is 6% — all without any input tax credit.
Want the law itself?
Go deeper on the Composition Scheme
This page answers one question. Our GST Knowledge Hub carries every section and rule behind it — the exact legal text, what it means in plain English, and how it has been amended. Free, no login.
Need this sorted for your specific case?
Every business’s facts are a little different. Talk to a GSTZone expert — we’ll tell you exactly where you stand, and handle the filing if you need it.
Or call +91 97554 06939 · WhatsApp us