What is GST composition scheme?
Introduced with GST in July 2017, the scheme was designed to reduce the compliance burden on India's small and micro businesses — dhabas, cafes, tiffin services, and neighbourhood eateries that would otherwise drown in monthly GSTR-1 + GSTR-3B filings.
The trade-off is structural: simpler filing and a flat rate in exchange for the ability to charge GST to customers and claim input tax credit. For a dine-in-only neighbourhood restaurant with turnover of ₹40–60 lakh a year, it's usually a net win. For a delivery-first cloud kitchen doing ₹1.2 Cr with 80% orders on Swiggy and Zomato, composition is off the table entirely.
Eligibility criteria — who can opt in
Four hard filters decide whether your restaurant qualifies:
1. Turnover threshold
- Regular states: aggregate turnover in the previous financial year must be up to ₹1.5 crore. This is the sum of all taxable, exempt, and export supplies across all your GSTINs on the same PAN.
- Special-category states (₹75 lakh threshold): Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand.
2. Only intra-state supplies
You must sell only within the state where you are registered. If you operate a Bangalore-registered restaurant and start delivering to Hosur (Tamil Nadu), that inter-state supply automatically makes you ineligible.
3. No supply through e-commerce operators
Under Section 10(2)(d) of the CGST Act, supplying through any electronic commerce operator required to collect TCS bars you from composition. Swiggy, Zomato, Uber Eats, and ONDC all qualify. See Section 7 for the details — this is the single biggest disqualifier.
4. No prohibited goods
You cannot deal in ice cream, pan masala, tobacco, or aerated waters. A restaurant selling Coke or Pepsi bottles is technically dealing in aerated waters and disqualified — most owners work around this by selling only in-house mocktails, fresh lime, and non-carbonated packaged juices.
The 2026 composition scheme rates for restaurants
The rate that applies to your restaurant under Notification No. 8/2017-Central Tax (as amended, including the July 2023 clarification):
| Component | Rate | Applied on |
|---|---|---|
| CGST | 2.5% | Aggregate turnover in state (quarter) |
| SGST / UTGST | 2.5% | Aggregate turnover in state (quarter) |
| Total composition levy | 5.0% | Aggregate turnover in state (quarter) |
| IGST | Not applicable | Inter-state supplies not permitted |
| Cess | Not applicable | No cess on restaurant composition |
Note also: this 5% is paid from your own margin. You cannot show GST separately on the customer bill and cannot collect it. If a customer orders food worth ₹500, you charge ₹500 (inclusive) and remit ₹25 out of that ₹500 to the government in the quarterly CMP-08.
Composition vs Regular GST — pros/cons matrix
The most useful way to think about the choice: composition removes complexity but shifts the tax burden onto you. Regular GST is more paperwork but customers absorb the tax.
| Dimension | Composition Scheme | Regular GST (restaurant) |
|---|---|---|
| Rate | 5% (2.5% + 2.5%) — from your pocket | 5% (2.5% + 2.5%) — charged to customer |
| Charge GST on customer bill | No — bill inclusive of tax | Yes — shown separately |
| Input tax credit | Not allowed | Not allowed for restaurants (Notif. 46/2017) |
| Filing frequency | Quarterly CMP-08 + annual GSTR-4 | Monthly GSTR-1 + GSTR-3B |
| Invoice format | Bill of Supply with declaration | Tax Invoice |
| Inter-state supply | Not allowed | Allowed |
| Swiggy / Zomato / ONDC | Not allowed | Allowed |
| Late fee if CMP-08 delayed | ₹200/day (max ₹5,000) | ₹50/day (₹20/day nil return) |
| Compliance cost / year (typical) | ₹3,000–₹6,000 CA fee | ₹12,000–₹24,000 CA fee |
| Best for | Dine-in-only, turnover ₹20L–₹1.5Cr, no aggregators | Delivery-heavy, aggregator sales, multi-state, ₹1.5Cr+ |
How to opt into composition scheme
New registration
Registering a fresh restaurant on the GST portal? Opt for composition in Form GST REG-01 — there's a checkbox in business details. The scheme takes effect from the registration grant date.
Existing registration — switching to composition
- Log in to gst.gov.in → Services → Registration → Application to Opt for Composition Levy (Form CMP-02).
- Declare turnover in previous FY, nature of business, and eligibility acknowledgement.
- File before 31 March for the scheme to apply from 1 April.
- Within 60 days, file Form GST ITC-03 to reverse any existing input tax credit on stock — composition does not allow retained ITC.
Annual re-election
Once opted in, composition status renews automatically each FY as long as you remain eligible. No need to re-file CMP-02 annually — but you must file Form CMP-04 the moment you cross the turnover limit, start inter-state supply, or begin selling through an e-commerce operator.
What you can and cannot do under composition
What you CAN do
- Serve dine-in, takeaway, and your own restaurant-run delivery (not via Swiggy/Zomato)
- Accept UPI, cash, card, and wallet payments
- Operate a QR menu; take orders via your own website or WhatsApp Business
- Turn over up to ₹1.5 Cr per FY; operate multiple outlets in the same state under one PAN
- Sell in-house packaged food (mithai boxes, snack packs) at composition rate
What you CANNOT do
- List on Swiggy, Zomato, Uber Eats, ONDC, or any e-commerce operator
- Charge GST separately on customer bills; issue Tax Invoices (only Bills of Supply)
- Claim input tax credit on ingredients, rent, POS, or capital goods
- Supply inter-state (delivery to another state)
- Sell alcohol, pan masala, tobacco, aerated waters, or branded ice cream
- Be a casual or non-resident taxable person
The composition scheme catch — you CANNOT do aggregator sales
What this means in practice:
- Listing on Zomato "just to test" while on composition violates the scheme. The department can assess you at regular GST + interest + penalty from the date of the first Zomato sale.
- ONDC is technically an e-commerce operator despite being government-backed. Sellers on ONDC cannot be under composition — a nuance most practitioners miss.
- Your own website and WhatsApp Business orders are not "e-commerce operator" sales — you are the supplier transacting directly with the buyer. Composition remains valid.
- QR menu + Razorpay checkout is fine — Razorpay is a payment aggregator, not an e-commerce operator supplying your food.
The realistic decision framework
Two coherent 2026 paths for a small Indian restaurant:
- Path A — Pure direct-channel on composition: dine-in + takeaway + own delivery + WhatsApp + QR menu. 5% flat quarterly. Perfect for neighbourhood eateries, tiffin services, small cafes under ₹1.5 Cr.
- Path B — Regular GST + aggregator business: list on Swiggy/Zomato/ONDC, charge 5% GST on bills, file monthly GSTR-1 + GSTR-3B. More paperwork but unlocks the 60–70% of urban delivery demand aggregators still own.
Trying to run both simultaneously is not an option. The GST department cross-references TCS data from Swiggy and Zomato against composition dealer lists monthly — mismatches trigger notices.
One inbox for direct orders — WhatsApp + QR menu + own website
Online eMenu's unified CRM is built for composition-scheme restaurants who want to run pure direct-channel business without touching aggregators. WhatsApp Business ordering, QR menu, own-website checkout, KDS, GST composition invoice format — all in one screen. ₹199/month all-in. Live in 48 hours.
See the unified CRMCompliance requirements — CMP-08, GSTR-4, invoice format
Quarterly payment — Form CMP-08
Every quarter you file CMP-08 declaring turnover and paying 5% composition tax on it. Due dates:
- Q1 (Apr–Jun): due 18 July
- Q2 (Jul–Sep): due 18 October
- Q3 (Oct–Dec): due 18 January
- Q4 (Jan–Mar): due 18 April
Annual return — Form GSTR-4
Once a year you file GSTR-4 consolidating the year's turnover, tax paid across quarters, and inward supply summary. Due date: 30 April of the following financial year (e.g. GSTR-4 for FY 2025–26 is due 30 April 2026).
Invoice format — Bill of Supply with mandatory declaration
The declaration "Composition Taxable Person — Not eligible to collect tax on supplies" is mandated by Rule 5(1)(f) of the CGST Rules. It must appear on every Bill of Supply, business signboard, quotation, and the composition dealer's website. Failure attracts a penalty of up to ₹25,000 under Section 125 of the CGST Act.
5-step opt-in playbook
Confirm turnover under ₹1.5 Cr in previous FY (₹75 lakh for special-category states), all intra-state supplies, and zero aggregator sales. Pull last year's GSTR-1 or bank statement to confirm.
gst.gov.in → Services → Registration → Application to Opt for Composition Levy. File before 31 March for the scheme to apply from 1 April. New registrations opt in via REG-01 checkbox.
Change all customer bills to Bill of Supply format with the mandatory declaration at the top. Print new signboards. Update your quotation templates. Reverse any existing ITC via Form GST ITC-03 within 60 days.
Configure your POS to composition mode. Online eMenu supports composition-scheme invoicing natively — one toggle in Settings switches every KOT, customer receipt, and back-office report to Bill of Supply format with the declaration.
Pay 5% on quarterly turnover via CMP-08 by the 18th of the month following each quarter. File annual GSTR-4 by 30 April of the following FY. Set calendar reminders — the ₹200/day late fee compounds fast.
FAQ
Who is eligible for GST composition scheme in 2026?
Restaurants with turnover up to ₹1.5 crore in the previous FY — ₹75 lakh for special-category states (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand). Supplies must be intra-state only, no e-commerce operator sales, and no dealing in ice cream, pan masala, tobacco, or aerated waters.
What's the composition rate for restaurants in India?
5% flat — 2.5% CGST + 2.5% SGST — paid quarterly on aggregate turnover. You cannot collect this GST from customers. Rate is per CGST Rule 7 and Notification 8/2017-Central Tax as amended in July 2023.
Can I do Swiggy/Zomato orders under composition scheme?
No. Section 10(2)(d) of the CGST Act bars supplies through any e-commerce operator required to collect TCS. Swiggy, Zomato, ONDC and Uber Eats all qualify. Even one order via them makes you ineligible for the entire quarter. This is the scheme's biggest catch.
How is composition scheme different from regular GST?
Composition: 5% flat from your pocket, no GST on customer bills, no ITC, quarterly CMP-08 + annual GSTR-4. Regular: 5% GST charged to customer on bill, no ITC either (Notif. 46/2017), monthly GSTR-1 + GSTR-3B. Composition = simpler filing but you absorb tax; regular = more paperwork but customer pays.
Can I claim input tax credit under composition?
No. ITC is fully denied — no recovery of GST on ingredients, rent, or POS. The main structural trade-off: simpler filing in exchange for zero ITC. Note that restaurants under regular GST also can't claim ITC (Notif. 46/2017), so the ITC difference is smaller than it appears.
What if my turnover crosses ₹1.5 Cr during the year?
File Form CMP-04 within 7 days and switch to regular GST from the day after crossing. Continuing under composition after breaching the limit triggers retrospective tax liability + interest + penalty.
Do I need to update my invoice format for composition scheme?
Yes. Rule 5(1)(f) mandates a Bill of Supply (not a Tax Invoice) with the declaration "Composition Taxable Person — Not eligible to collect tax on supplies" printed at the top. Same on every signboard and quotation. Non-compliance triggers ₹25,000 penalty under Section 125.
Does Online eMenu POS support composition-scheme invoicing?
Yes. Online eMenu is one of the few POS systems in India that natively supports both regular GST and composition-scheme invoice formats — one settings toggle switches every bill, KOT, and receipt to Bill of Supply with the mandatory declaration. Quarterly CMP-08 turnover and annual GSTR-4 data are auto-generated. ₹199/month all-in.