What it means
Under section 10 of the CGST Act a small business can opt to pay tax at a fixed share of turnover:
| Business | Turnover limit (previous year) | Total rate |
|---|---|---|
| Traders and manufacturers | ₹1.5 crore (₹75 lakh in special-category states) | 1% |
| Restaurants (no alcohol) | same | 5% |
| Service providers | ₹50 lakh | 6% |
In return it cannot collect GST on its bills, issues a bill of supply instead of a tax invoice, cannot claim input tax credit, and cannot sell goods to other states. It files CMP-08 every quarter and GSTR-4 once a year.
Example
A Mysuru kirana store with last year’s turnover of ₹90 lakh sells ₹8,00,000 of taxable goods in a quarter. It pays 1%, that is ₹8,000 (₹4,000 CGST + ₹4,000 SGST), from its own margin. A regular dealer would charge 5% or 18% to buyers and claim credit on purchases.
Common mistakes
- Printing “tax invoice” or showing GST on the bill. A composition dealer must print “composition taxable person, not eligible to collect tax on supplies” on bills.
- Staying in the scheme after turnover crosses the limit during the year.
- Choosing it while selling mostly to registered businesses, who then get no credit.
In MyRecords
You can set your GST registration to Registered Composition during setup, and POS receipts without tax print as a bill of supply. Sales invoices still print as the GST tax invoice, without the composition declaration, and preparing CMP-08 and GSTR-4 is not built yet; both are on the roadmap.