GST Composition Scheme Eligibility Checker

What You Trade Away for the Flat Rate

The composition scheme's appeal is simplicity: a flat 1-6% tax rate on turnover and quarterly (rather than monthly) return filing, with far less compliance overhead than the regular scheme. The trade-off is real, though — you can't charge GST separately on your invoices (the flat rate comes out of your own margin, not added on top for the customer to bear), and you can't claim Input Tax Credit on anything you purchase. For a business with significant GST-paid inputs, losing ITC can outweigh the simplicity benefit.

Turnover Limits at a Glance

Note the service-provider limit is a separate, lower ceiling under its own scheme — it isn't the same composition scheme as the goods/restaurant one, just similarly named. A business that's mostly goods with a small amount of incidental service income may still qualify under the goods scheme rather than being pushed into the lower-limit service scheme — check the specific incidental-income carve-out if this applies to you.

Eligibility Can Lapse Mid-Year

Unlike some scheme choices that lock in for a full financial year, composition scheme eligibility lapses immediately — not from the start of the next year — the moment your turnover crosses the applicable limit during the current year. From that point, you must switch to regular GST compliance (charging GST on invoices, becoming eligible for ITC, filing under the regular schedule) going forward. Track your running turnover through the year rather than checking eligibility only at the start.

Worked Example: A Qualifying Business

Consider a small furniture trader based in Maharashtra (a regular-limit state) with ₹95 lakh aggregate turnover in the preceding financial year, selling only within the state, not through an e-commerce platform, and not manufacturing any of the excluded items:

Because the trader's turnover sits well under the ₹1.5 crore ceiling for a regular state and none of the disqualifying conditions apply, this business can opt into the composition scheme and pay 1% of turnover as tax, filing quarterly rather than monthly.

Worked Example: A Disqualified Business

Now take a similar trader with ₹90 lakh turnover — comfortably under the limit — but who sells a portion of their goods through an e-commerce marketplace:

This illustrates why the checkboxes above matter as much as the turnover figure itself: the e-commerce restriction is an absolute bar, not a limit that scales with turnover. A business well within the rupee ceiling can still be shut out entirely by a single disqualifying business activity.

How Aggregate Turnover Is Computed

The turnover figure that matters for this eligibility check is "aggregate turnover" computed on an all-India, PAN-wide basis — meaning it includes turnover across all GST registrations held under the same PAN, not just the turnover of the single registration you're checking eligibility for. It also includes exempt supplies and exports, not just taxable sales. A business with multiple branches registered separately in different states needs to add up turnover across all of them before comparing against the composition limit, rather than checking each registration's turnover in isolation.

How to Opt Into the Composition Scheme

Composition scheme is not automatic — it's an election you make. An existing regular taxpayer who wants to switch typically files an intimation (commonly through Form CMP-02 on the GST portal) before the start of the financial year in which they want the scheme to apply, since the choice generally has to be made upfront for the whole year rather than partway through. A new registrant, on the other hand, can usually opt in at the time of applying for GST registration itself, so the scheme applies from the effective date of registration.

One important consequence of switching in: if you were claiming Input Tax Credit as a regular taxpayer, moving to composition generally requires you to reverse credit already claimed on stock, capital goods, and inputs held as of the day before the scheme kicks in. This reversal is easy to overlook when the appeal of the flat rate is front of mind — factor it in before deciding, particularly if you're carrying a lot of GST-paid inventory.

Filing Obligations Under the Scheme

The compliance simplicity that draws businesses to this scheme is real but not zero. Composition taxpayers commonly make a quarterly tax payment (often referred to via Form CMP-08) reporting turnover and paying the flat-rate tax for that quarter, and then file a simplified annual return (commonly Form GSTR-4) summarizing the year. This is a meaningfully lighter load than the regular scheme's monthly return cycle, but it isn't "no filing" — missed quarterly payments or the annual return can still attract late fees and interest, so treat composition as reduced compliance, not zero compliance.

Because rates, forms, and due dates under GST are revised periodically through notifications, always cross-check the current form numbers and due dates on the GST portal or with your consultant before a filing, rather than relying on any single source for the exact date.

Switching Out of the Scheme

A business can voluntarily withdraw from the composition scheme even without breaching the turnover limit — for instance, if it starts wanting to sell inter-state, or needs to pass on Input Tax Credit to business customers who ask for a tax invoice. Withdrawal is typically filed through the portal and takes effect from the date specified, after which regular scheme rules — GST charged on invoices, ITC available on purchases, and the standard monthly/quarterly return cycle — apply going forward.

Whether the switch is voluntary or forced by crossing the turnover limit, the same practical issue arises on exit as on entry, just in reverse: you generally become entitled to claim ITC on stock and capital goods held as of the date you move to the regular scheme, subject to the specific conditions and time limits in force at that time. Keep stock records current so this transition credit can be computed accurately when it happens.

Composition Scheme vs Regular Scheme — Which Fits

The right choice depends less on the headline tax rate and more on your customer base and cost structure. A business selling mainly to end consumers (who don't care about claiming ITC on their purchase) and with relatively low GST-paid input costs — say, a small retail trader or a neighborhood restaurant — often benefits most from composition's flat rate and lighter filing. A business selling largely to other GST-registered businesses, where customers specifically want a tax invoice to claim their own ITC, or a business with heavy GST-paid input costs that would otherwise go unclaimed, usually comes out ahead staying in the regular scheme despite the extra paperwork. Run both scenarios with your actual numbers — turnover, typical margins, and how much ITC you'd otherwise claim — before deciding, rather than opting in for the lower headline rate alone. Since switching between schemes carries its own procedural steps and timing restrictions, treat this as a decision to revisit annually rather than something to change back and forth as convenient mid-year. A quick review at the start of each financial year, alongside your last year's actual turnover and ITC figures, is usually enough to catch a case where the better-suited scheme has changed since you last decided.