GST Composition Scheme 2025-26: Turnover Limits & New Rules

The GST Composition Scheme is designed for small taxpayers to escape the complexities of the regular GST regime. Instead of maintaining detailed records and filing monthly returns, eligible businesses pay a fixed, lower rate of tax on their total turnover.

For the Financial Year 2025-26, the GST Composition Scheme remains a vital tool for small businesses aiming to minimize paperwork. While the core turnover limits have remained stable, the integration of GST 2.0 (effective late 2025) and new automation rules makes understanding these thresholds more critical than ever.

1. The Current Turnover Thresholds

To be eligible for the scheme in FY 2025-26, your aggregate turnover in the preceding financial year (2024-25) must not have exceeded the following limits:

2. Fixed Tax Rates for 2025-26

Under this scheme, you do not charge GST to your customers. Instead, you pay a small percentage out of your pocket:

• Manufacturers & Traders:

  1% (0.5% CGST + 0.5% SGST)

• Restaurants (No Alcohol):

  5% (2.5% CGST + 2.5% SGST)

• Service Providers:

  6% (3% CGST + 3% SGST)

3. Key Changes & “GST 2.0” Impact

While the turnover numbers look familiar, the operational environment in 2026 has changed:

• Auto-Exclusion Rule:

  If your turnover crosses the threshold (e.g., ₹1.5 crore) at any point during the year, the GST portal will now automatically transition your profile to a Regular Taxpayer. You must start issuing Tax Invoices immediately from that day.

• Negative List Updates:

  As of 2026, manufacturers of tobacco and “sin goods” (now taxed at a consolidated 40% under the new slabs) remain strictly ineligible for the Composition Scheme.

• No Inter-State Sales:

  You still cannot make outward inter-state supplies. However, you are permitted to purchase goods from other states.

4. Compliance Calendar: Important Dates

Managing a composition business is simpler, but missing these dates leads to heavy penalties:

• Opting In (Form CMP-02):

  If you are a regular taxpayer wanting to switch to Composition for FY 2025-26, you must file this on the portal by March 31, 2025.

• Quarterly Payment (CMP-08):

  Due by the 18th of the month following each quarter (e.g., April 18, July 18, etc.).

• Annual Return (GSTR-4):

  Due by April 30 following the end of the financial year.

Conclusion: Navigating the Future of Your Small Business

      The GST Composition Scheme in FY 2025-26 remains the most powerful tool for small-scale entrepreneurs to bypass the administrative maze of modern taxation. While the “GST 2.0” reforms have automated many parts of the portal, the core benefit of the scheme—simplicity—remains its biggest draw.

      However, the decision to opt for this scheme in 2026 should not be based on turnover alone. With the new automated turnover tracking and real-time system blocks, businesses must be more vigilant than ever. If your goal is to maintain high liquidity, reduce accounting costs, and serve local retail customers, the Composition Scheme is likely your best path to sustainable growth.

        The Final Word for 2026: The scheme is no longer just a “small tax” option; it is a strategic choice. If your business model relies on intra-state trade and you value “peace of mind” over “tax credits,” the ₹1.5 Crore (goods) or ₹50 Lakh (services) umbrella offers the protection you need to focus on what matters most—growing your business.