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GST Compliance

GST Composition Scheme Invoice — Rules, Rates & Format Explained

The GST Composition Scheme is a simplified tax scheme for small businesses. Under composition, businesses pay a fixed percentage of turnover as GST and cannot charge GST from customers — meaning they issue a Bill of Supply instead of a tax invoice. This simplicity comes at the cost of no ITC and no ability to sell inter-state.

By Arjun Sharma · GST & Tax Compliance Specialist Reviewed for GST accuracy
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Composition Scheme Rates and Eligibility

Business Type Composition Rate Turnover Limit
Traders (goods) 1% (0.5% CGST + 0.5% SGST) Up to ₹1.5 crore
Manufacturers (goods) 1% (0.5% CGST + 0.5% SGST) Up to ₹1.5 crore
Restaurants (non-alcohol) 5% (2.5% CGST + 2.5% SGST) Up to ₹1.5 crore
Service providers (QRMP/special) 6% (3% CGST + 3% SGST) Up to ₹50 lakh

Bill of Supply — What It Must Contain

Composition dealers must issue a Bill of Supply (not a tax invoice) for every sale. The Bill of Supply must show: seller's name, address, and GSTIN, the phrase "Composition Taxable Person, not eligible to collect tax on supplies", consecutive bill number, date, description of goods or services, and total sale value. The bill must NOT show any GST amount — the composition tax is paid by the dealer directly to the government as a percentage of turnover, not collected from customers. Composition dealers file a simplified quarterly return CMP-08 (summary of outward supplies) and an annual return GSTR-4.

Example

A Jaipur craft goods retailer with ₹80 lakh annual turnover opts for composition at 1%. Monthly turnover: ₹6,67,000. Composition tax payable: ₹6,670 (1% of turnover, paid to government). Invoice to customer: ₹6,67,000 total — no GST line item shown. Customer cannot claim ITC since no GST is charged.

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FAQs

Who can opt for GST composition scheme?

Manufacturers, traders, and restaurants with annual turnover up to ₹1.5 crore. Service providers (except restaurants) can opt for a composition-like scheme up to ₹50 lakh turnover.

Can a composition dealer issue a tax invoice?

No. Composition dealers must issue a Bill of Supply and must not collect GST from customers. Issuing a tax invoice and collecting GST is a violation.

Can customers claim ITC from composition dealers?

No. Since no GST is charged on the bill, the buyer cannot claim any ITC.

What is the disadvantage of composition scheme?

No ITC on purchases, no inter-state sales allowed, no GST collected from customers (reducing competitiveness for B2B sales), and turnover ceiling limits growth.

Why Businesses Stop Using Excel for GST Invoices

Manual GST calculation mistakes

One wrong CGST/SGST split or a misapplied rate triggers notices and ITC denial for your buyer.

Slow invoice creation

Copying last month's Excel file, updating dates, recalculating — 20 minutes for what should take 30 seconds.

Formatting breaks on every device

Excel invoices look different on every printer and PDF converter. Clients complain about unreadable layouts.

No easy sharing or payment link

Sending PDFs over WhatsApp with no way for clients to pay directly slows down collections.

Incorrect tax type (IGST vs CGST+SGST)

Excel can't auto-detect intra vs inter-state supply. Wrong tax type = ITC rejected for your buyer.

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Disclaimer: The information in this article is for general informational purposes only and does not constitute professional tax, legal, or financial advice. GST rules and rates are subject to change. Consult a qualified CA or tax professional before making compliance decisions.

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