GST Compliance – Opting for Composition Levy (CMP-02)

Opting for Composition Levy (Form GST CMP-02)

Edition: September 2025
Disclaimer: This manual is for compliance facilitation. It does not substitute statutory provisions, notifications, or circulars. Taxpayers must verify with the CGST/SGST Acts, Rules, and GSTN updates.

✍️ Preface

The Composition Scheme under GST is designed to simplify compliance for small taxpayers. Eligible taxpayers can pay GST at a fixed rate of turnover and file simplified returns. To opt into the scheme, an existing taxpayer must file Form GST CMP-02 on the GST Portal before the commencement of the relevant financial year.

This manual consolidates the law, eligibility, process for filing CMP-02, obligations of taxpayers, FAQs with statutory basis, and a compliance checklist.

📑 Table of Contents

1. Law Governing Composition Scheme

2. Eligibility & Restrictions

3. Step-by-Step Process to File CMP-02

4. Post-Option Compliance (Stock Intimation, Returns)

5. FAQs (with Basis)

6. Compliance Checklist (Fillable Format)

⚖️ 1. Law Governing Composition Scheme

• Section 10, CGST Act, 2017 – Composition Levy.

• Section 25, CGST Act, 2017 – Registration provisions.

• Rule 3–7, CGST Rules, 2017 – Conditions and procedure for opting Composition Scheme.

• Rule 62, CGST Rules, 2017 – Returns to be furnished by Composition taxpayers.

🎯 2. Eligibility & Restrictions

As per FAQs:

• Eligible: Regular taxpayers with PAN-based aggregate turnover below threshold limits (₹1.5 crore for goods, ₹50 lakhs for services – subject to notifications).

• Not Eligible:

  • Persons making inter-state outward supplies.

  • Persons supplying goods through e-commerce operators liable under Sec. 52.

  • Casual Taxable Persons / NRTP.

  • ISD, TDS Deductor/Collector.

  • Manufacturers of notified goods.

  • SEZ Units/Developers (if one GSTIN on PAN belongs to SEZ).

🛠️ 3. Step-by-Step Process to File CMP-02

As per GST Portal Manual:

1. Login – Visit www.gst.gov.in → Login with credentials.

2. Navigate: Services > Registration > Application to Opt for Composition Levy.

3. CMP-02 form displayed with auto-populated GSTIN, Legal Name, Trade Name, Address, and Jurisdiction.

4. Select Category of Registered Person. (Note: Manufacturers of ineligible goods cannot proceed).

5. Accept Composition Declaration & Verification.

6. Select Authorized Signatory → Enter Place of filing.

7. Click SAVE.

   • If previous FY turnover exceeds threshold, system prevents submission.

8. Click SUBMIT WITH DSC/EVC:

   • DSC: Select certificate & sign.

   • EVC: Enter OTP sent to registered mobile/email.

9. Success message displayed → Acknowledgement sent by email/SMS within 15 minutes.

📌 4. Post-Option Compliance

• Stock Intimation: File Form ITC-03 within 60 days of opting into scheme to declare ITC reversal.

• Returns:

  • CMP-08 – Quarterly statement-cum-challan for self-assessed tax.

  • GSTR-4 – Annual return.

❓ 5. FAQs (with Basis)

Q1. Can I opt for composition if I supply services?
Yes, allowed since FY 2019-20, subject to turnover limit. (FAQ 8)

Q2. Is fresh application required every year?
No, once opted, it continues until conditions are violated. (FAQ 5)

Q3. Is stock intimation mandatory?
Yes, ITC-03 must be filed within 60 days. (FAQ 6)

Q4. What happens if turnover exceeds threshold?
System prevents filing CMP-02 if prior FY AATO exceeds limit. (Manual)

Q5. Can I save CMP-02 and file later?
Yes, draft can be saved for 15 days. (FAQ 7)

Q6. What returns must be filed?
CMP-08 quarterly and GSTR-4 annually. (FAQ 9)

Q7. Can SEZ registered persons opt?
No, SEZ Units/Developers are ineligible. (FAQ 10)

✅ 6. Compliance Checklist (Fillable Format)