The Institute of Chartered Accountants of India (ICAI) has released the revised edition of its Handbook on Composition Scheme under GST (February 2026), comprehensively updated to reflect legislative amendments, notifications, circulars, and judicial pronouncements up to 31 January 2026.
The publication, brought out by the GST & Indirect Taxes Committee of ICAI, aims to provide clarity and practical guidance to professionals and small taxpayers navigating the evolving framework of the Composition Scheme under the Goods and Services Tax (GST) regime.
Focus on Ease of Compliance for Small Taxpayers
In the Foreword dated 4 February 2026, ICAI President CA. Charanjot Singh Nanda emphasized that small taxpayers form the backbone of the Indian economy and require a predictable and simplified compliance structure. Within the GST ecosystem, the Composition Scheme plays a critical role by:
- Allowing payment of tax at a fixed rate on turnover,
- Reducing procedural formalities,
- Relaxing record-keeping requirements, and
- Minimizing return filing obligations.
The Handbook highlights that while GST is a destination-based, multi-point tax system with input tax credit (ITC) mechanisms, smaller businesses often face infrastructural and financial challenges in maintaining detailed compliance. The Composition Scheme was therefore introduced to balance revenue considerations with ease of doing business.
Key Legal Clarifications and Structural Overview
The revised Handbook provides an in-depth analysis of Section 10 of the Central Goods and Services Tax Act, 2017, explaining the overriding nature of its provisions through the non-obstante clause. It also clarifies that composition taxpayers remain liable to pay tax under reverse charge mechanism in terms of Sections 9(3) and 9(4), even though they are not eligible to claim input tax credit on such payments.
One of the significant interpretational clarifications discussed is that composition tax is an amount paid “in lieu of” tax payable under Section 9(1). This means that a taxpayer opting for the scheme is not required to pay regular GST rates (such as 18%) on outward supplies, provided composition levy is validly opted.
Two Broad Composition Structures Explained
While commonly referred to as two separate schemes, the Handbook clarifies that legally there is a unified framework with distinct provisions for:
- Suppliers of goods (including restaurant services under Schedule II), and
- Small service providers or mixed suppliers (introduced via Section 10(2A) with effect from 1 April 2019).
The publication traces the evolution of eligibility conditions across different periods — from July 2017 to the present — explaining how service supply restrictions were gradually relaxed and how interest income from loans and advances is treated for turnover calculation purposes.
Updated Threshold Limits and State-Specific Variations
The revised edition details the enhanced threshold limits notified through various Central Tax Notifications. As per Notification No. 14/2019-Central Tax (as amended), the threshold for most States stands at ₹1.5 crore of aggregate turnover in the preceding financial year, while certain specified States continue to have a ₹75 lakh limit.
The Handbook also elaborates on the definition of “aggregate turnover” under Section 2(6), emphasizing that it must be computed on an all-India basis for entities sharing the same PAN.
Procedural Roadmap: Rules, Forms, Notifications
A dedicated chapter provides a consolidated snapshot of relevant GST Rules, including:
- Rule 3 (Intimation for composition levy),
- Rule 6 (Validity and withdrawal),
- Rule 62 (Return filing in Form CMP-08 and GSTR-4), and
- Rule 80 (Annual return).
It also catalogues prescribed forms such as CMP-01, CMP-02, CMP-04, CMP-05, CMP-08, GSTR-4, and GSTR-9A, alongside key notifications and circulars, including Circular No. 77/51/2018-GST on denial of composition option.
Practical Illustrations and Case Studies
The Handbook includes case studies addressing:
- Multi-state registrations under a single PAN,
- Turnover calculations across specified States,
- Reverse charge implications for composition dealers, and
- Transitional issues arising from legislative amendments.
These illustrations aim to bridge the gap between statutory language and real-world application.
Strengthening Professional Preparedness
In the Preface, the GST & Indirect Taxes Committee noted that the evolving nature of GST law necessitates continuous knowledge updating. The February 2026 edition seeks to equip chartered accountants and stakeholders with a ready reference that combines statutory provisions, interpretational clarity, and compliance guidance.
With the latest amendments under the Finance (No. 2) Act, 2019 and subsequent notifications incorporated, the revised Handbook is positioned as a comprehensive technical resource for practitioners advising small and medium enterprises under the GST Composition Scheme.
