Also called composition levy, composition dealer, CMP-08
The composition scheme is a simpler way to pay GST for small businesses. Instead of charging GST on every sale and claiming credit on purchases, a composition dealer pays a fixed percentage of turnover. For traders and manufacturers of goods, the turnover limit is ₹1.5 crore in most states and lower in some special category states.
The trade-offs are real. A composition dealer cannot charge GST to customers, issues a bill of supply instead of a tax invoice, cannot claim input tax credit and cannot sell goods to other states. Business buyers often prefer regular suppliers because they cannot claim credit on a composition dealer's bill.
A kirana with ₹60 lakh of yearly sales pays 1% of turnover, which is ₹60,000 a year, split equally between CGST and SGST. Tax is paid quarterly through form CMP-08, with an annual return in GSTR-4. The dealer cannot collect this tax from customers, so it comes out of the shop's own margin.