GST composition scheme: limits, rates and rules
Updated 22 October 2026 · 4 min read
The composition scheme lets small businesses pay GST at a low flat rate on turnover, with simpler returns — in exchange for some restrictions.
Who can opt in
| Business | Turnover limit | Tax rate on turnover |
|---|---|---|
| Manufacturers and traders | ₹1.5 crore (₹75 lakh in special category states) | 1% |
| Restaurants not serving alcohol | ₹1.5 crore (₹75 lakh in special category states) | 5% |
| Other service providers | ₹50 lakh | 6% |
Rates are the total of CGST and SGST. Confirm the current limits with your CA before opting in.
What you give up
- You cannot collect GST from customers or show tax on the bill; you issue a bill of supply instead.
- You cannot claim input tax credit on purchases.
- You generally cannot sell goods to other states.
- You must display "composition taxable person" at your place of business and on your bills.
Is it right for you?
It suits small shops that sell mostly to consumers within their state and buy little from GST-registered suppliers. If your customers are businesses that want input credit, regular GST is usually better.
Common questions
What is the composition scheme limit?+
₹1.5 crore of turnover for manufacturers, traders and restaurants (₹75 lakh in special category states), and ₹50 lakh for other service providers.
What tax rate applies under composition?+
1% for manufacturers and traders, 5% for restaurants not serving alcohol, and 6% for other eligible service providers.
Can a composition dealer charge GST on the bill?+
No. A composition dealer issues a bill of supply and does not collect GST from customers.
Sources
This guide is general information, not legal or tax advice. Rules change; confirm with your CA or the official notification.
Nuronix handles billing, stock and your books; your CA handles the returns. 14 days free, no card.