GST · Glossary
Composition Scheme
GST lite registration for small suppliers — fixed low rate, no ITC, Bill of Supply instead of Tax Invoice.
Updated 2026-10-08Source: Income-tax Act · CGST Act · CBDT/CBIC
What it means
The Composition Scheme, available under Section 10 of the CGST Act, 2017, lets eligible small taxpayers pay GST at a fixed lower rate on turnover instead of the standard 18% rate, without maintaining detailed invoice-level records. Applicable rates for service providers: 6% (3% CGST + 3% SGST) on annual turnover up to Rs. 50 lakh.
Key constraints for service providers under composition: (a) cannot make inter-state supplies; (b) cannot issue a Tax Invoice — must issue a Bill of Supply without charging GST to the customer; (c) cannot claim Input Tax Credit on purchases; (d) must file GSTR-4 annually (due 30 June after the financial year, from FY 2024-25) and a quarterly CMP-08 challan-cum-statement by the 18th after each quarter. Composition dealers who cross Rs. 50 lakh turnover mid-year must exit the scheme and register as regular taxpayers from the date of crossing.
A worked example
A Jaipur-based content writer earning Rs. 30L/year registers under composition. She bills clients about Rs. 2,50,000/month on a Bill of Supply (no GST charged) and pays 6% of turnover, Rs. 1.8L a year, through quarterly CMP-08 — simple, predictable, no ITC claims.
Composition is rarely right for B2B freelancers because your registered clients cannot claim ITC on your supply — they effectively pay 6% extra in hidden cost. Evaluate carefully if more than 30% of your revenue comes from GST-registered businesses.
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Sources
Income-tax entries cite the Income-tax Act 1961, which governs FY 2025–26 (the return filed in 2026); from tax year 2026–27 the Income-tax Act 2025 applies, with new section numbers shown where we give them. GST law is unchanged. General information, not tax advice; verify with your CA before you file.
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