The composition scheme lets a small business pay GST as a flat percentage of its turnover and file fewer returns. In Gujarat the limit is ₹1.5 crore of turnover for traders, manufacturers and restaurants, and ₹50 lakh for service providers. In return, you cannot charge GST to customers or claim input tax credit.
Limits and rates
| Type of business | Turnover limit (previous year) | Rate (CGST plus SGST) |
|---|---|---|
| Traders | ₹1.5 crore | 1% of taxable turnover |
| Manufacturers | ₹1.5 crore | 1% of turnover in the state |
| Restaurants | ₹1.5 crore | 5% |
| Service providers (section 10(2A)) | ₹50 lakh | 6% |
Gujarat uses the ₹1.5 crore limit. A lower ₹75 lakh limit applies only in eight hill and north-eastern states. A trader, manufacturer or restaurant in the scheme may also supply other services worth up to 10% of turnover or ₹5 lakh, whichever is higher.
Who cannot opt in
- Businesses that sell to customers in other states. Buying from other states is fine; selling to them is not.
- Businesses that supply goods or services not taxable under GST.
- Service providers who sell through an e-commerce operator that collects tax at source.
- Casual and non-resident taxable persons.
- Makers of ice cream, pan masala, tobacco products, aerated waters, and certain bricks and roofing tiles.
Selling goods online is allowed since 1 October 2023, but only to buyers within Gujarat. The e-commerce operator must block sales to other states and collects tax at source on your sales.
What the scheme requires
- No tax on your bills, no credit on your purchases. You pay the composition tax from your own margin.
- Bill of supply. Issue a bill of supply, not a tax invoice, headed “composition taxable person, not eligible to collect tax on supplies”.
- Signboard. Show “composition taxable person” on the signboard at every place of business.
- Quarterly payment. Pay tax with CMP-08 by the 18th of the month after each quarter.
- Annual return. File GSTR-4 by 30 June after the financial year.
How to opt in
- File CMP-02 on the GST portal before the financial year starts. For 2027-28, that means by 31 March 2027.
- If you hold stock on which you claimed input tax credit, file ITC-03 within 60 days from the start of the year.
- Watch your turnover: the option lapses from the day your turnover for the year crosses the limit.
Is it right for your business?
It tends to suit a business that sells mostly to consumers within Gujarat and buys few taxable inputs. If your customers are GST-registered businesses, they cannot claim input tax credit on your bills, which can make you a costlier supplier for them. The GST calculator helps compare prices with and without GST.
Common questions
What is the composition limit in Gujarat?
₹1.5 crore of turnover in the previous financial year for traders, manufacturers and restaurants, and ₹50 lakh for service providers under section 10(2A).
Can a composition dealer sell goods online?
Yes, since 1 October 2023, but only to buyers within the state, through an e-commerce operator that collects tax at source. Supplying services through such an operator is not allowed.
When is CMP-08 due?
By the 18th of the month after each quarter: 18 July, 18 October, 18 January and 18 April.
Can I claim input tax credit under the composition scheme?
No. A composition dealer gets no input tax credit and cannot collect GST from customers.
We register businesses under the scheme and file CMP-08 and GSTR-4: see GST registration and GST return filing. For regular return dates, read GST return due dates and late fees for Gujarat businesses.
Sources: CGST Act, 2017, section 10; CGST Rules, rules 5, 7 and 62; Notifications 14/2019, 43/2019, 4/2022 and 36/2023-Central Tax; Finance Act, 2023; CBIC; GST Council.