GST · Glossary

Composition Scheme

GST lite registration for small suppliers — fixed low rate, no ITC, Bill of Supply instead of Tax Invoice.

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 April of the following FY) and quarterly CMP-08 challan-cum-statement. Composition dealers who cross Rs. 50 lakh turnover mid-year must exit the scheme and register as regular taxpayers from the date of crossing.

Worked example

A Jaipur-based content writer earning Rs. 30L/year registers under composition. She bills clients Rs. 50,000/month with a Bill of Supply (no GST charged). She pays 6% on her annual turnover = Rs. 1.8L to the government via CMP-08 — simple, predictable, no ITC claims.

Practitioner tip

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.

Related Tool

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GST rates & SAC codes

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GSTIN — 15-character alphanumeric GST registration number assigned to every GST-registered taxpayer.
GSTR-1 — Monthly or quarterly return of outward supplies (sales) filed by every registered taxpayer.

Sources

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