Composition Scheme Billing in India (2026) — Bill of Supply, CMP-08, GSTR-4

Most billing-software posts assume you’re a regular GST-registered dealer — charging GST on invoices, claiming input tax credit, filing GSTR-1 + 3B monthly. But about 25% of small Indian businesses are under composition scheme — and everything about billing works differently.

This post covers what composition billing actually looks like, why most tools get it wrong, and how to stay compliant.

Who’s on composition scheme

You can opt for composition if your aggregate turnover is below the threshold:

• Goods dealers (traders + manufacturers): ≤ ₹1.5 Cr turnover (₹75L in special-category states)
• Service providers: ≤ ₹50L turnover
• Restaurants: ≤ ₹1.5 Cr turnover

You opt in at registration or file FORM GST CMP-02 to switch during the year. The catch: once you opt in, you cannot charge GST on invoices, and you cannot claim ITC on purchases.

The trade-off

What composition gives you:

• Flat-rate GST payment out of your own pocket:
  • 1% for manufacturers and traders
  • 5% for restaurants (that don’t serve alcohol)
  • 6% for service providers
• Quarterly payment (CMP-08) instead of monthly GSTR-3B
• One annual return (GSTR-4) instead of 12 GSTR-1s
• Massively simpler paperwork

What composition takes away:

• Can’t charge GST to customers → you absorb it into your price
• Can’t claim ITC on purchases → your input tax is a real cost
• Can’t sell inter-state (only intra-state supplies allowed)
• Can’t sell through e-commerce operators
• Buyers can’t claim ITC from your invoices — makes you unattractive to B2B customers

For most B2C retailers below ₹1.5 Cr turnover, composition is a clear win. For B2B, it usually isn’t.

What you issue instead of a tax invoice: Bill of Supply

Composition dealers must issue a Bill of Supply (under Rule 49), not a tax invoice. Difference:

Field	Tax Invoice	Bill of Supply
GSTIN	required	required
Invoice/Bill number	required (unique)	required (unique)
Date	required	required
Customer details	required	required (GSTIN only if B2B)
HSN/SAC code	required (6-digit if turnover ≥ ₹5 Cr, else 4-digit)	required (4-digit)
Taxable value	required	required
GST rate + amount	required	MUST NOT APPEAR
Total	required	required (= taxable value)
“Composition taxable person, not eligible to collect tax on supplies” declaration	N/A	REQUIRED — statutory phrase
Supplier signature	required	required

That declaration at the bottom is mandatory. Not optional, not “recommended” — if it’s missing, the document is non-compliant.

The exact declaration

Print this on every Bill of Supply (copy-paste):

“Composition taxable person, not eligible to collect tax on supplies.”

For service providers under the 6% scheme (NN 2/2019-CT(R)):

“Taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies.”

Worked example

You’re a kirana store under composition. A customer buys ₹2,000 of goods.

Tax invoice (regular dealer, for comparison):

Line	Value
Taxable value	₹1,785.71
CGST @ 6%	₹107.14
SGST @ 6%	₹107.14
Total	₹2,000
Customer paid	₹2,000
You remit ₹214.28 to the government

Bill of Supply (composition dealer):

Line	Value
Total	₹2,000
Customer paid	₹2,000
You remit ₹20 (1% of ₹2,000) to the government out of your margin

Composition dealer keeps more of each sale but absorbs the tax cost instead of passing it through.

Quarterly payment — CMP-08

Every quarter, composition dealers file FORM GST CMP-08 with:

• Total outward supplies (the sum of Bills of Supply issued)
• Total inward supplies attracting reverse charge
• Tax payable at 1% / 5% / 6%

Due dates:

• Q1 (Apr–Jun): by 18 July
• Q2 (Jul–Sep): by 18 October
• Q3 (Oct–Dec): by 18 January
• Q4 (Jan–Mar): by 18 April

Pay tax via challan on the GST portal.

Annual return — GSTR-4

Once a year, file GSTR-4 by 30 April of the following year. Summarises the full year’s supplies, purchases, and tax paid. Think of it as the year-end reconciliation — the four CMP-08s get tied together.

How billing software should handle composition

If you’re on composition, you need a tool that:

1. Doesn’t show GST rates / amounts on the PDF — this is the single biggest miss in most tools. They’ll happily compute and print CGST + SGST even on a Bill of Supply, which makes the document non-compliant.
2. Prints the statutory declaration automatically at the bottom.
3. Labels the document “Bill of Supply”, not “Tax Invoice”.
4. Tracks turnover so you know when you’re approaching ₹1.5 Cr / ₹50L.
5. Generates CMP-08 summary (total outward supplies per quarter) so filing takes 5 minutes.
6. Rejects interstate sales (composition can’t do IGST).

What 21bill currently supports

Honest status as of 2026:

• ✅ Label as Bill of Supply — you can toggle per org
• ✅ Suppress GST rate on PDF — driven by org-level composition flag
• ✅ Print statutory declaration — auto-appended
• ✅ Turnover tracker — dashboard shows YTD against limit
• ⚠️ CMP-08 quarterly summary — not yet; currently a manual sum of Bills of Supply per quarter
• ⚠️ GSTR-4 annual export — not yet

If you’re on composition and need the composition-specific flows, email us first — we can tell you whether to stay on 21bill or use a composition-specialised tool.

Frequent questions

Q: Can I switch from composition to regular mid-year? Yes. File FORM GST CMP-04 within 7 days of crossing the threshold (or voluntarily). You then become a regular dealer — start charging GST, filing GSTR-1, etc. Existing ITC on stock you already own can be claimed — separate form (ITC-01).

Q: What if I serve inter-state customers occasionally? Composition doesn’t allow any inter-state outward supplies. A single inter-state sale kicks you out. Inter-state purchases are fine (you just can’t claim ITC on them).

Q: Does composition work with e-commerce platforms? Composition dealers can’t sell through e-commerce operators who collect TCS (Amazon, Flipkart, etc.). You can sell through non-TCS platforms (your own Shopify, for example).

Q: Restaurant composition — does the 5% rate apply to everything? 5% on total supply value (food + drinks, excluding alcohol). If you serve alcohol, you’re a regular dealer — composition isn’t available.

Q: What about the ₹50L threshold for services? This is the service composition scheme under Notification 2/2019. Different from the ₹1.5 Cr trader scheme. Your GSTIN can only be on one or the other — pick based on what you mostly sell.

Q: Does reverse-charge GST still apply to composition dealers? Yes. If you receive services from a GTA or an advocate, you pay GST on reverse charge — separate from your composition tax. You can’t claim ITC on it either (ironic, but that’s the rule).

Bottom line

Composition is simpler but not “free money” — you’re paying tax, just out of your margin instead of on top of price. If you’re a B2C retailer below ₹1.5 Cr, it’s usually the right choice. If you’re B2B or approaching the threshold, do the math — a regular registration with ITC claims can easily be cheaper overall.

Pick your billing tool based on whether it actually handles composition correctly — a lot of them don’t.

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Related reading:

• GST Invoice Format Rules 2026
• CGST vs SGST vs IGST explainer
• GST Software — full tour
• For kirana stores