--- title: "New GST Rate for Composition Scheme 2026: 1% to 6% GST Rate" description: "New GST rate under the composition scheme in 2026 is 1% to 6% based on business type. Apply the correct GST rate automatically with Busy on every invoice." canonical: "https://busy.in/gst-rates/composition-scheme/" author: "Hitesh Aggarwal" published: "2025-05-19T04:11:41.000Z" category: "GST Rates" --- - The GST Composition Scheme offers a simplified tax option for small businesses with fixed rates and reduced compliance. - Eligible businesses include traders, small manufacturers, restaurants (non-alcoholic), and certain service providers. - New GST rates are 1% for traders and manufacturers, and 5% for restaurants and some service providers. - Businesses must have a turnover under ₹1.5 crore and cannot engage in inter-state sales or sell through e-commerce. - The scheme requires quarterly tax filing and does not allow for tax invoices or input tax credit. # New GST Rate for Composition Scheme: A Simple Tax Option for Small Businesses Running a small business comes with plenty of challenges, and tax filing shouldn’t be one of them. That’s where the [**GST Composition Scheme**](https://busy.in/gst/gst-composition-scheme/) comes in. It’s designed to help small businesses with simplified tax rates and reduced compliance. In this guide, we explain the **gst rate for Composition Scheme**, eligibility rules, and how it benefits small traders and service providers. ## What Is the GST Composition Scheme? The Composition Scheme under [**GST (Goods and Services Tax)**](https://busy.in/gst/) is a simplified tax scheme for small taxpayers. Instead of collecting GST on every invoice and filing monthly returns, eligible businesses can pay tax at a fixed rate on their total turnover and file quarterly returns. It is ideal for: - Traders and shopkeepers - Small manufacturers - Restaurants (non-alcoholic) - Certain service providers ## New GST on Composition Scheme: Rates by Business Type | Business Type | New GST Rate | | --- | --- | | Traders / Dealers (Goods only) | 1% (0.5% CGST + 0.5% SGST) | | Manufacturers (not dealing in tobacco, ice cream, etc.) | 1% | | Restaurants (not serving alcohol) | 5% | | Service providers (limited categories) | 5% (2.5% CGST + 2.5% SGST) | ## Old GST on Composition Scheme: Rates by Business Type ### (Old GST Rates – Applicable Until 21st September) | Business Type | GST Rate (Composition) | | --- | --- | | Traders / Dealers (Goods only) | 1% (0.5% CGST + 0.5% SGST) | | Manufacturers (not dealing in tobacco, ice cream, etc.) | 1% | | Restaurants (not serving alcohol) | 5% | | Service providers (limited categories) | 6% (3% CGST + 3% SGST) | Live Demo Available Today ## Never Lose Composition Scheme Records- Auto Backup to Cloud Trusted by 6,00,000+ Users 4.6 Google Rating \* No credit card required ## Who Can Opt for the Composition Scheme? Businesses can apply if: - Aggregate turnover is up to ₹1.5 crore (in most states) or ₹75 lakhs (for special category states) - They are not involved in inter-state supply of goods - They are not selling through e-commerce platforms - They do not deal in non-eligible items like pan masala, tobacco, or ice cream ## Benefits of the GST Composition Scheme - Lower tax rates - Fewer returns (Quarterly instead of monthly) - No detailed invoice-level reporting - Less compliance burden **Get a Free Demo –** [**Best Billing and Invoicing Software**](https://busy.in/accounting-software/invoicing-and-gst-billing/) ## Limitations of Composition Scheme | Limitation | Details | | --- | --- | | Cannot issue tax invoices | Only bill of supply allowed | | Cannot collect GST from customers | Tax is paid from own margin | | No Input Tax Credit (ITC) available | Cost may increase slightly | | Cannot do inter-state sales | Only intra-state supply allowed | **Get a Free Trial –** [**Best Accounting Software For Small Business**](https://busy.in/accounting-software/) ## Filing and Compliance | Requirement | Frequency | | --- | --- | | GST Return (GSTR-4) | Quarterly | | Annual Statement (GSTR-9A) | Yearly | | Payment of Tax via CMP-08 | Quarterly | ## Conclusion Understanding the **gst on composition scheme** helps small businesses save time and money while staying compliant with tax laws. It’s a smart choice if your operations are simple and primarily local. ## About the author **Hitesh Aggarwal** As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience. ## Frequently asked questions ### What is the GST rate for composition scheme? It's **1%** for traders/manufacturers, **5%** for restaurants, and **6%** for service providers. ### Who is eligible for the GST on composition scheme? Businesses with turnover up to **₹1.5 crore** (**₹75 lakh** in some states) who only [**supply goods/services within their state**](https://busy.in/gst/general-rules-of-place-of-supply-of-services/). ### Can a composition dealer collect GST from customers? No. Dealers under this scheme cannot collect GST and must issue a **bill of supply**, not a tax invoice. ### Is ITC allowed under the composition scheme? No. [**Input Tax Credit (ITC)**](https://busy.in/gst/input-tax-credit/) is not available for businesses under this scheme. ### Can service providers opt for the composition scheme? Yes, under a special scheme introduced in **2019**, eligible service providers can pay **6%** GST. ## Related articles - [New GST on Skincare Products: Rate, Branding & Retail Pricing](https://busy.in/gst-rates/skincare-products/) - [New GST on Industrial Machinery: Slabs, ITC & MSME Effect](https://busy.in/gst-rates/industrial-machinery/) - [New GST on Restaurant Meals: Dine-in, Takeaway & Delivery Compared](https://busy.in/gst-rates/restaurant-meals/) - [New GST on Kitchen Utensils: What’s Taxed and What’s Not?](https://busy.in/gst-rates/kitchen-utensils/) - [New GST on Online Education: Rate, Exemptions & EdTech Impact](https://busy.in/gst-rates/online-education/) - [New GST on Packaging Materials: Tax Implication Across Industries](https://busy.in/gst-rates/packaging-materials/) - [New GST on Digital Marketing Services: Tax Rates & Input Credit Explained](https://busy.in/gst-rates/digital-marketing-services/) - [New GST on Pesticides: Rates, Agri-Exemptions & Sector Impact](https://busy.in/gst-rates/pesticides/) - [New GST on Butter: From Dairy to Dining – What You Pay](https://busy.in/gst-rates/butter/) - [GST on Honey: Rate, Applicability & Industry Outlook](https://busy.in/gst-rates/honey/)