GST Composition Scheme Calculator

The GST Composition Scheme is a simplified tax compliance scheme under Section 10 of the CGST Act, 2017, designed for small taxpayers. It allows eligible businesses to pay GST at a fixed rate on their total turnover instead of the regular GST rates, reducing compliance burden significantly. To be eligible, the aggregate turnover in the previous financial year must not exceed ₹1.5 crore (₹75 lakh for special category states like Northeast and Himachal Pradesh). Service providers with turnover up to ₹50 lakh can opt for the composition scheme under Section 10(2A) at 6% rate. Manufacturers of ice cream, pan masala, tobacco products, and interstate suppliers are not eligible for the composition scheme.

The GST Composition Scheme rates are: 1% of turnover for manufacturers and traders of goods (0.5% CGST + 0.5% SGST), 2.5% of turnover for restaurant services (1.25% CGST + 1.25% SGST), and 6% of turnover for other service providers with turnover up to ₹50 lakh (3% CGST + 3% SGST). These rates are applied on the total turnover (not on individual transactions) and are significantly lower than regular GST rates of 5%, 18%, and 28%. However, composition dealers cannot charge GST separately on invoices and cannot claim Input Tax Credit (ITC) on their purchases. The Composition Scheme Calculator helps you compute your quarterly tax liability based on these rates.

Businesses opting for the GST Composition Scheme face several restrictions: (1) Cannot make inter-state supplies (all supplies must be intra-state), (2) Cannot collect GST from buyers on invoices, (3) Cannot claim Input Tax Credit (ITC) on purchases, (4) Cannot supply goods through e-commerce operators, (5) Cannot manufacture notified goods like ice cream, pan masala, or tobacco products, (6) Must mention 'Composition Taxable Person' on all invoices and signboards, (7) Must file only GSTR-4 (quarterly return) instead of monthly GSTR-3B, (8) Annual return (GSTR-9A) is optional but recommended. These restrictions mean the composition scheme is best suited for small B2C businesses with predominantly local customers.

Under the regular GST scheme, businesses charge applicable GST rates (5%, 18%, 28%) on each invoice, file monthly returns (GSTR-1, GSTR-3B), maintain detailed records, and can claim Input Tax Credit (ITC). Under the Composition Scheme, businesses pay a flat rate (1%/2.5%/6%) on total turnover, file only one quarterly return (GSTR-4), cannot claim ITC, cannot issue tax invoices, and have significantly lower compliance requirements. The regular scheme is better for businesses with large B2B sales (where ITC matters), while the composition scheme benefits small B2C businesses where the compliance cost of regular GST exceeds the tax savings from ITC. Use the Composition Scheme Calculator to compare your tax outgo under both schemes.

Under the GST Composition Scheme, taxpayers must file GSTR-4 (CMP-08) on a quarterly basis by the 18th of the month following the quarter (e.g., January 18 for Oct-Dec quarter). GSTR-4 requires details of outward supplies, inward supplies attracting reverse charge, and tax paid using Form CMP-08. Additionally, an annual return in Form GSTR-4 (earlier GSTR-9A) must be filed by April 30th of the following financial year. The composition tax must be paid through the electronic cash ledger (no ITC offset available). Late filing attracts a penalty of ₹50 per day (₹25 for nil returns). The Composition Scheme Calculator generates the quarterly tax amount to be reported in GSTR-4.

Yes, a composition dealer can purchase goods from unregistered dealers. However, if a composition dealer purchases from an unregistered supplier, they are liable to pay GST under the Reverse Charge Mechanism (RCM) on such purchases at the applicable rate. The RCM liability must be paid in cash (cannot use ITC as composition dealers have no ITC), and it must be reported in GSTR-4. This is an important compliance requirement — many composition dealers are unaware of RCM on unregistered purchases. The Composition Scheme Calculator factors in RCM liabilities to give you the complete tax payable amount for the quarter.

You should consider opting out of the Composition Scheme when: (1) Your turnover exceeds ₹1.5 crore (₹75 lakh for special category states), (2) You need to make inter-state supplies, (3) Your customers (B2B buyers) require tax invoices with GST to claim ITC, and you're losing business to regular taxpayers, (4) Your input costs are high and the ITC benefit under the regular scheme exceeds the lower tax rate advantage of composition, (5) You want to sell through e-commerce platforms, (6) You start manufacturing notified goods (tobacco, ice cream, pan masala). To opt out, file Form CMP-04 on the GST portal. The switch takes effect from the beginning of the next financial year, or immediately if turnover exceeds the threshold. Use the Composition Scheme Calculator to compare your total tax liability under both schemes before deciding.