GST Composition Scheme (2026)

Last Updated: May 2026

The GST Composition Scheme is designed for small businesses to simplify tax compliance and reduce tax burden.

What is Composition Scheme?

It allows businesses to pay GST at a fixed rate on turnover instead of normal GST rates.

Eligibility Criteria

• Turnover up to ₹1.5 crore
• Not engaged in interstate sales
• Not supplying through e-commerce

Tax Rates

• Manufacturers: 1%
• Traders: 1%
• Restaurants: 5%

Benefits

• Lower tax rates
• Simplified returns
• Less compliance burden

Limitations

• No Input Tax Credit
• No interstate sales
• Cannot issue tax invoice

Example

Business turnover = ₹50 lakh

Tax at 1% = ₹50,000 annually

Who Should Choose Composition Scheme?

• Small shop owners
• Local traders
• Small restaurants

FAQs

Can ITC be claimed?

No.

Can I switch to normal scheme?

Yes, anytime.

Is composition scheme good?

Yes, for small businesses with low compliance needs.

Conclusion

The composition scheme is ideal for small businesses looking for simplicity. However, it has limitations, so choose wisely based on business needs.