Thousands of small traders, manufacturers and restaurants in India are registered under the GST Composition Scheme — a simpler way to pay tax that suits businesses with modest turnover. But it comes with one rule that trips up almost everyone: a composition dealer cannot issue a normal tax invoice. You issue a Bill of Supply, and you must print a specific declaration on it.
Get that wrong and you are technically collecting tax you are not allowed to collect. This guide explains the scheme in plain language and shows how billing software keeps you compliant automatically.
What Is the GST Composition Scheme?
Under the regular GST system you charge tax on every sale, collect it from the customer, claim credit on your purchases, and file detailed monthly returns. The composition scheme replaces all of that with a single flat rate on your total turnover, paid quarterly. You do not charge GST to customers, and you cannot claim input tax credit.
It exists to save very small businesses from the paperwork of full GST. In exchange, you keep it simple.
Who Can Opt In — and the Flat Rates
- Traders & manufacturers — turnover up to ₹1.5 crore, taxed at 1% of turnover
- Restaurants (not serving alcohol) — taxed at 5%
- Other service providers — turnover up to ₹50 lakh, taxed at 6%
You cannot opt in if you make inter-state sales, sell through e-commerce operators, or deal in goods outside the scheme. If that is you, stay on regular GST.
Bill of Supply vs Tax Invoice
This is the part that matters at the counter. A regular dealer gives a Tax Invoice showing CGST and SGST. A composition dealer gives a Bill of Supply with no tax shown at all — the price is simply the price.
The law also requires a Bill of Supply to carry this exact line: "Composition taxable person, not eligible to collect tax on supplies." Miss it and your bill is non-compliant.
Composition only changes what you charge customers. You still pay GST to your suppliers when you buy stock — you just cannot claim it back as credit. Factor that into your pricing.
CMP-08: The Quarterly Filing
Instead of monthly returns, a composition dealer files CMP-08 every quarter — a short statement of turnover and the flat tax due on it — plus an annual GSTR-4. CMP-08 is due by the 18th of the month after each quarter (18 July, 18 October, 18 January, 18 April).
| Regular Dealer | Composition Dealer | |
|---|---|---|
| Document issued | Tax Invoice | Bill of Supply |
| Tax on the bill | CGST + SGST shown | No tax charged |
| Input tax credit | Yes | No |
| Returns | GSTR-1 + GSTR-3B monthly | CMP-08 quarterly + GSTR-4 yearly |
How Billing Software Handles Composition
The right software makes this a one-time setting, not a daily worry. In Billux you turn on "Composition Scheme" in Settings and set your rate. From then on:
- Every bill is created tax-free — no GST is added, on any till
- The document prints as a Bill of Supply with the mandatory declaration already on it
- A built-in CMP-08 report works out your turnover and flat tax for each quarter, so filing takes minutes
The Bottom Line
The composition scheme is a genuine simplification — but only if your billing gets the Bill of Supply and CMP-08 right for you. Software that knows the rule turns a compliance risk into a checkbox.
Try it free for 7 days at billux.in/register and switch on composition mode in seconds.
