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 (₹75 lakh in some special category states), taxed at 1% of turnover
- Restaurants (not serving alcohol) — same turnover limit, taxed at 5%
- Other service providers — turnover up to ₹50 lakh, taxed at 6%
You cannot opt in if you make inter-state sales of goods, or if you manufacture ice cream, pan masala, tobacco products or aerated water. Since 1 October 2023 a composition dealer may sell goods through an e-commerce operator, but only within its own state. If you sell across states, 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). From FY 2024-25 onwards, GSTR-4 is due by 30 June after the financial year (it was 30 April earlier).
| 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 GST 2.0 rate changes of 22 September 2025 do not change the composition rates above; they matter only for what you pay suppliers. Moving to the regular scheme? Our GST invoice format guide lists every field a tax invoice must carry.
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.
Frequently Asked Questions
Who can opt for the GST composition scheme?
Traders, manufacturers and restaurants with turnover up to ₹1.5 crore (₹75 lakh in some special category states), and other service providers up to ₹50 lakh. You cannot opt in if you sell goods inter-state or make ice cream, pan masala, tobacco products or aerated water.
What must a Bill of Supply show for a composition dealer?
Your name, address and GSTIN, a serial number and date, the customer's details, item descriptions and value, and the declaration: "composition taxable person, not eligible to collect tax on supplies". No GST is charged on it.
What is the due date for CMP-08?
CMP-08 is due by the 18th of the month after each quarter: 18 July, 18 October, 18 January and 18 April. A nil CMP-08 must still be filed if there is nothing to pay.
When is GSTR-4 due for composition dealers?
From FY 2024-25 onwards, the annual GSTR-4 is due by 30 June after the end of the financial year. It was 30 April earlier. File it even if your turnover was nil, or late fees apply.
Can a composition dealer sell on Amazon or Flipkart?
Since 1 October 2023, a composition dealer may sell goods through an e-commerce operator, but only within its own state. Inter-state sales of goods are still not allowed under the scheme.
