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For businessesRates reviewed September 2026

GST Composition Scheme Calculator under Section 10

The composition scheme is a trade: a small business pays a flat percentage of turnover instead of tax on value added, and in exchange gives up the right to charge GST on its invoices and the right to claim input tax credit. For a shop selling to consumers who cannot use credit anyway, that is usually a good trade. For a business selling to other registered businesses, it rarely is, because the buyer loses the credit and will negotiate the price down by roughly that amount.

Section 10 runs two schemes side by side. The original one covers traders, manufacturers and restaurants, with the turnover ceiling raised from ₹50 lakh to ₹1.5 crore by notification 14/2019-Central Tax, and to ₹75 lakh in eight special category states. Section 10(2A), added later, opened a separate option to service providers and mixed suppliers at a ₹50 lakh ceiling, since the original scheme had effectively shut services out.

Rule 7 fixes the actual rates, and the figures quoted publicly are the CGST and State tax combined. A manufacturer or trader pays 1 percent, a restaurant not serving alcohol pays 5 percent, and a section 10(2A) supplier pays 6 percent. The base differs too: a trader pays on the turnover of taxable supplies only, while a manufacturer and a restaurant pay on the whole turnover in the state.

Compliance is light by design. Tax goes out quarterly in CMP-08 by the 18th of the month after the quarter, and a single annual return in GSTR-4 follows by 30 June. This page reflects FY 2026-27.

Composition Scheme Calculator

Rule 7 sets a different rate and a different base for each.

₹

Tax is paid quarterly in CMP-08 with a single annual return in GSTR-4.

Eligibility for FY 2026-27 is tested on the FY 2025-26 figure across all registrations on the same PAN.

₹

The lower ceiling covers Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand.

Composition tax for the period

₹12,000

1% of ₹12,00,000, payable in CMP-08 by 18 October 2026

Composition rate0.5% CGST plus 0.5% SGST on turnover of taxable supplies in the state
1%
Turnover for the period
₹12,00,000
CGST at 0.5%
₹6,000
SGST at 0.5%
₹6,000
Tax payable for the periodpaid out of your own margin, because a composition dealer cannot charge GST to the customer
₹12,000
Turnover ceiling for this option₹1.5 crore
₹1,50,00,000
Eligibility on the preceding year₹90,00,000 against a limit of ₹1,50,00,000
Within the ceiling
Headroom before the ceiling₹60 lakh
₹60,00,000
CMP-08 dueQuarter 2, July to September 2026
18 October 2026
  • A composition dealer cannot charge GST on its invoice and cannot claim input tax credit, so the whole levy comes out of the margin rather than being passed on.
  • Reverse charge liability is outside the scheme. Tax under section 9(3) is paid at the ordinary rate on top of the composition amount.
  • The option lapses under section 10(3) from the day turnover in the current year crosses the ceiling, and the registered person moves to the ordinary rates from that day.

The formula

Composition tax = Turnover for the period × Rate ÷ 100, where the rate is 1% for a trader or manufacturer, 5% for a restaurant and 6% under section 10(2A)

Turnover for the period
Turnover in the state for a manufacturer or restaurant, and turnover of taxable supplies for a trader.
Rate
The Rule 7 rate, quoted here as the CGST and State tax combined rather than the half that each Act carries.
Turnover ceiling
₹1.5 crore under section 10(1), ₹75 lakh in special category states, and ₹50 lakh under section 10(2A).
Aggregate turnover
All supplies across every registration on the same PAN, which is what the ceiling is tested against.

The tax is a cost to the dealer, not a charge to the customer, because a composition dealer cannot show GST on its invoice.

How to calculate it

  1. 1

    Test eligibility on last year's aggregate turnover

    Eligibility for FY 2026-27 turns on aggregate turnover in FY 2025-26, computed across every registration holding the same PAN. The ceiling is ₹1.5 crore for traders, manufacturers and restaurants, ₹75 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand, and ₹50 lakh for the section 10(2A) service option.

  2. 2

    Rule out the disqualifications

    Section 10(2) shuts the scheme to anyone making inter-state outward supplies, supplying goods that are not leviable to tax, supplying through an e-commerce operator required to collect tax at source, manufacturing notified goods such as pan masala, ice cream and tobacco, or acting as a casual or non-resident taxable person. If two registrations share a PAN, either both opt in or neither can. The proviso still names the Income-tax Act, 1961 when it defines that PAN, but that Act was repealed and replaced by the Income-tax Act, 2025 from 1 April 2026, so read the reference as pointing to the new Act.

  3. 3

    Check the services headroom if you supply goods

    A goods-scheme dealer may also supply services up to 10 percent of turnover in the state in the preceding year or ₹5 lakh, whichever is higher. Interest on deposits, loans and advances is left out of that measurement. Cross the line and the section 10(1) option is lost, though the section 10(2A) option at 6 percent may still be open.

  4. 4

    Apply the Rule 7 rate to the right base

    A manufacturer and a restaurant pay on turnover in the state, so exempt supplies are inside the base. A trader pays only on the turnover of taxable supplies of goods and services, so exempt sales stay out of the base. This one distinction is worth real money to a dealer with a large exempt line, and it is the part most often computed wrongly.

  5. 5

    Pay quarterly in CMP-08

    Rule 62 requires a statement of self-assessed tax in CMP-08 by the 18th of the month after each quarter, so 18 July, 18 October, 18 January and 18 April. The payment is made in cash: a composition dealer has no credit ledger to draw on. A nil quarter still needs the statement, and two consecutive defaults can lead to cancellation.

  6. 6

    File GSTR-4 and watch the ceiling during the year

    One annual return in GSTR-4 follows by 30 June after the year end, the date having moved from 30 April with effect from FY 2024-25. Watch the running turnover as well: under section 10(3) the option lapses from the day turnover in the current year crosses the ceiling, and ordinary rates apply from that day forward.

Composition rates, bases and ceilings under section 10 and Rule 7

Composition rates, bases and ceilings under section 10 and Rule 7
BusinessRateBaseTurnover ceiling
Manufacturer, other than of notified goods1%Turnover in the state₹1.5 crore, ₹75 lakh in special category states
Restaurant not serving alcohol5%Turnover in the state₹1.5 crore, ₹75 lakh in special category states
Trader or other supplier of goods1%Turnover of taxable supplies in the state₹1.5 crore, ₹75 lakh in special category states
Service provider or mixed supplier under section 10(2A)6%Turnover of supplies of goods and services in the state₹50 lakh

Worked example

Business
Trader in an ordinary state
Aggregate turnover in FY 2025-26
₹90,00,000
Turnover of taxable supplies, July to September 2026
₹12,00,000
Rate under Rule 7
1%, being 0.5% CGST and 0.5% SGST
  • ₹90,00,000 is below the ₹1,50,00,000 ceiling, so the option is available for FY 2026-27
  • Composition tax = ₹12,00,000 × 1% = ₹12,000
  • CGST = ₹12,00,000 × 0.5% = ₹6,000 and SGST = ₹12,00,000 × 0.5% = ₹6,000
  • Headroom before the ceiling = ₹1,50,00,000 - ₹90,00,000 = ₹60,00,000
  • The ₹12,000 is paid in cash through CMP-08 by 18 October 2026 and comes out of the dealer's own margin

Composition tax of ₹12,000 for the quarter, payable in CMP-08 by 18 October 2026

Frequently asked questions

Rule 7 sets 1 percent for a manufacturer and 1 percent for a trader or other supplier of goods, 5 percent for a restaurant not serving alcohol, and 6 percent for a service provider or mixed supplier under section 10(2A). Each figure is the CGST and State tax combined, so the CGST half is 0.5, 0.5, 2.5 and 3 percent respectively.
₹1.5 crore of aggregate turnover in the preceding financial year for traders, manufacturers and restaurants, set by notification 14/2019-Central Tax, reduced to ₹75 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand. The separate service provider option under section 10(2A) has a ceiling of ₹50 lakh in every state.
Anyone making inter-state outward supplies, supplying goods or services not leviable to GST, supplying through an e-commerce operator that collects tax at source, manufacturing goods notified as excluded such as pan masala, ice cream and tobacco, or registered as a casual or non-resident taxable person. Where several registrations share a PAN, all of them must opt in together or none can.
By the 18th of the month following each quarter under Rule 62, so 18 July for April to June, 18 October for July to September, 18 January for October to December and 18 April for January to March. CMP-08 is a statement of self-assessed tax rather than a return, and it has to be filed even for a quarter with no turnover.
No. A composition dealer pays a flat percentage of turnover in place of tax on value added, and gives up input tax credit as part of the bargain. It also cannot show GST on its invoices, which is why it issues a bill of supply rather than a tax invoice and must state on it that it is a composition taxable person not eligible to collect tax on supplies.
Yes, and at the ordinary notified rate rather than the composition rate. Section 10(1) is expressly subject to sections 9(3) and 9(4), so notified inward supplies such as legal services or goods transport agency freight carry the normal reverse charge, paid in cash and with no credit available. That amount sits on top of the composition tax.
Under section 10(3) the option lapses from the day aggregate turnover in the current financial year exceeds the ceiling, and ordinary rates apply from that day onwards. The dealer must file CMP-04 to withdraw, switch to tax invoices, and may claim credit on stock held on the day before the switch by filing ITC-01 within thirty days. The lapse is not retrospective for the part of the year already run.

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

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