Author: Dr. Haresh Adwani

Dr. Haresh Adwani April 2026 10 min read

What Is the GST Composition Scheme?

The GST Composition Scheme, governed by Section 10 of the Central Goods and Services Tax (CGST) Act 2017, is a simplified taxation option for small businesses. Instead of calculating GST on every individual invoice, tracking ITC, filing monthly returns, and reconciling supplier data, eligible businesses pay a single flat percentage of their total quarterly turnover as GST.

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GST Composition Scheme Eligibility 2026: Who Can and Cannot Opt In

Turnover Thresholds (FY 2026-27)

Business Category	Turnover Limit (All-India PAN)	Special Category States
Manufacturers and traders of goods	Rs. 1.5 crore	Rs. 75 lakh
Restaurants (not serving alcohol)	Rs. 1.5 crore	Rs. 75 lakh
Service providers	Rs. 50 lakh	Rs. 50 lakh

Who Cannot Opt for the GST Composition Scheme (Statutory Exclusions)

• Manufacturers of ice cream, pan masala, aerated beverages, or tobacco and tobacco products.
• Businesses making inter-state outward supplies of goods (you may purchase from other states, but not sell).
• E-commerce operators required to collect Tax Collected at Source (TCS) under Section 52 of the CGST Act.
• Non-resident taxable persons and casual taxable persons.
• Businesses supplying goods through an e-commerce operator (sellers on Amazon, Flipkart, Meesho, etc.).

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GST Rates Under the GST Composition Scheme 2026

Business Type	Total GST Rate	CGST Component	SGST Component	Returns Required
Manufacturers of goods	1%	0.5%	0.5%	CMP-08 + GSTR-4
Traders and retailers of goods	1%	0.5%	0.5%	CMP-08 + GSTR-4
Restaurants (not serving alcohol)	5%	2.5%	2.5%	CMP-08 + GSTR-4
Service providers	6%	3%	3%	CMP-08 + GSTR-4

Should Your Business Choose the GST Composition Scheme? A Decision Framework

Choose the GST Composition Scheme If…

• All or most of your customers are end consumers (B2C) who do not need GST tax invoices to claim ITC.
• Your business is localised you do not supply goods to customers in other states.
• Input costs are low relative to sales you would not benefit significantly from ITC claims.
• You want to reduce monthly compliance costs and professional fees.
• Your turnover is comfortably below the threshold with no expectation of crossing it mid-year.

Do NOT Choose the GST Composition Scheme If...

• You sell primarily to other GST registered businesses (B2B) composition dealer status prevents buyers from claiming ITC, making you commercially less competitive.
• You have high input purchases where ITC claims would significantly reduce your net tax burden.
• You sell goods to buyers in other states inter-state outward supply disqualifies you entirely.
• Your turnover is close to the threshold and growing mid-year disqualification creates significant compliance complications.
• You sell goods through e-commerce platforms such as Flipkart, Amazon, or Meesho.

Also Read:

https://itradvisor.in/blog/gst-compliance-checklist-india-2026

GST Compliance Requirements Under the Composition Scheme

CMP-08: Quarterly Statement-Cum-Challan

Quarter	Period	CMP-08 Due Date
Q1	April to June	18th July
Q2	July to September	18th October
Q3	October to December	18th January
Q4	January to March	18th April

Late payment penalty: Interest at 18% per annum from due date + late filing fee of Rs. 50 per day (Rs. 25 CGST + Rs. 25 SGST), subject to a maximum of Rs. 2,000 per return.

GSTR-4: Annual Return

GSTR4 is the annual return consolidating all CMP-08 filings. Due date: 30th April of the following financial year. For FY 2025-26, the due date is 30 April 2026. Late fee: Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST), maximum Rs. 5,000. The GST portal auto-populates CMP-08 data, making this return straightforward.

Bill of Supply: The Mandatory Billing Document

Composition dealers cannot issue a GST tax invoice. Every sale must be recorded on a Bill of Supply that prominently displays: “Composition Taxable Person, not eligible to collect tax on supplies.” Issuing a regular tax invoice or showing GST as a separate charge on the bill is a direct violation of Section 10(4) of the CGST Act and attracts penalty proceedings.

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How to Opt Into the Composition Scheme for FY 2026-27

1. Log in to www.gst.gov.in using your GSTIN credentials.
2. Navigate to: Services → Registration → Application to Opt for Composition Levy.
3. File Form GST CMP 02 and select your business category.
4. Accept the eligibility declaration and submit using DSC (companies/LLPs) or EVC/OTP (proprietors/partnerships).
5. Within 60 days of opting in, file Form ITC-03 to reverse any ITC balance held under the regular scheme.

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The 5 Costliest Composition Scheme Compliance Mistakes

Mistake 1: Not Tracking Aggregate Turnover Across All GST Registrations

The Rs. 1.5 crore (or Rs. 50 lakh for services) threshold applies to combined turnover under your PAN not per GSTIN. Business owners with multiple businesses frequently discover they are ineligible only after an audit. Implement a monthly consolidated turnover tracking system.

Mistake 2: Collecting GST Separately From Customers

Composition dealers bear the GST from their own margin it cannot be charged separately to customers. Collecting GST on composition dealer bills violates Section 10(4), exposes you to penalty proceedings, and means buyers cannot claim ITC on those amounts.

Mistake 3: Missing Reverse Charge Mechanism (RCM) Obligations

Even though composition dealers cannot claim ITC, they remain liable for GST under the Reverse Charge Mechanism on specified inward supplies such as services from unregistered vendors or notified categories. RCM tax must be paid in cash at regular GST rates and declared in CMP 08.

Mistake 4: Missing the CMP 08 Deadline

Interest at 18% per annum starts accumulating the day after the due date. Beyond the financial cost, repeated late filings are a compliance risk signal that increases the probability of audit selection.

Mistake 5: Continuing in the Scheme After Crossing the Turnover Limit

If your aggregate turnover crosses Rs. 1.5 crore (or Rs. 50 lakh for services) and you do not switch to the regular scheme within 7 days by filing Form CMP 04, every invoice issued after the threshold date is treated as irregular. GST demand, interest at 18% p.a., and penalty on the entire excess period turnover applies. This is the single most consequential composition scheme mistake.

Frequently Asked Questions

Conclusion:

The GST Composition Scheme is a powerful compliance simplification tool for eligible small businesses but only if chosen correctly and administered rigorously. The five mistakes outlined in this guide can collectively result in demands, penalties, and forced switch to the regular scheme under adverse conditions.

Adwani & Company assists small businesses in evaluating scheme eligibility, filing CMP02, managing CMP08 and GSTR4 filings, and switching to the regular scheme when necessary. Visit www.itradvisor.in for a consultation.

About the Author
Dr. Haresh Adwani | Founder, Adwani & Company Ph.D. in Commerce | 20+ years in Tax, FEMA & Financial Advisory Expert in: GST advisory · Income tax litigation · FEMA compliance · NRI taxation · F&O taxation · Corporate structuring .

Website: www.itradvisor.in

For consultations, schedule via the website.

Dr. Haresh Adwani April 2026 13 min read

Medical Tourism in India Demands Regulatory Expertise

India’s medical tourism sector was valued at over USD 9 billion and is growing at double-digit rates, driven by 60–80% lower treatment costs than Western nations, NABH accredited hospitals, and an internationally trained medical workforce. Yet this growth story carries a compliance warning: hospitals, medical facilitators, and intermediaries operating in this space face a layered regulatory environment that intersects FEMA 1999, GST law, and RBI master directions.

This guide authored by , with over two decades of advisory experience in healthcare taxation and FEMA compliance provides a comprehensive, legally authoritative reference for every stakeholder in the medical tourism value chain.

Also Read:

https://itradvisor.in/blog/itr-filing-2026-smart-strategieshttps://itradvisor.in/blog/itr-filing-2026-smart-strategies

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Why Foreign Patients Choose India for Medical Tourism

India’s medical tourism proposition rests on four pillars recognized by the Ministry of Tourism, Government of India:

• Cost advantage: A cardiac bypass costing USD 1,30,000 in the United States is performed in India for USD 7,000–10,000 with equivalent outcomes.
• Clinical accreditation: NABH and JCI accredited hospitals in Mumbai, Chennai, Delhi, Hyderabad, and Bengaluru meet international quality standards.
• Specialisation: Cardiac surgery, oncology, orthopaedics, IVF, and Ayurvedic wellness are India’s strongest medical tourism draws.
• Visa facilitation: The Medical Visa (M-Visa) and Medical Attendant Visa (MX-Visa) provide structured legal entry for foreign patients and up to two attendants.

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The Regulatory Framework: FEMA 1999 and Medical Tourism

For every hospital and facilitator handling foreign patients, the Foreign Exchange Management Act (FEMA) 1999 governs the receipt, reporting, and use of foreign currency. This is the most frequently overlooked compliance area and the one with the heaviest penalties.

Classification as Service Exporters

Hospitals and medical tourism facilitators receiving foreign currency payments are classified as service exporters under FEMA. This classification triggers a specific set of reporting and banking obligations:

• All foreign currency receipts must be deposited in an Exchange Earners’ Foreign Currency (EEFC) account or converted within RBI-prescribed timelines.
• Medical services provided to foreign patients qualify as ‘export of services’ under FEMA, making them eligible for Advance Authorisation and, where applicable, duty drawback benefits.
• Every foreign currency transaction must be processed through an Authorised Dealer (AD) bank direct offshore receipts held outside the Indian banking system are a FEMA violation.
• Medical facilitators earning commission from overseas principals must receive those commissions in accordance with RBI guidelines on payment for services.

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FEMA Compliance Obligations: Quick Reference

Requirement	Detail
Foreign currency receipt	Must be deposited in EEFC account or converted within prescribed timelines
Authorized Dealer Bank	All forex transactions routed through AD bank only
FIRC (Foreign Inward Remittance Certificate)	Must be obtained for every foreign currency receipt critical for GST refund claims
RBI Reporting	Transactions reported per RBI Master Directions; AD bank assists in compliance
Compounding for violations	FEMA violations can be compounded voluntarily under Section 15 preferable to ED proceedings

GST Framework for Medical Tourism: What Is Exempt and What Is Not

The GST treatment of medical tourism services is nuanced. Getting it wrong either by incorrectly charging GST on exempt services or by failing to claim legitimate export-of-service refunds has direct financial consequences.

Core Healthcare Exemption (Notification No. 12/2017-Central Tax (Rate)

Healthcare services provided by a clinical establishment, an authorized medical practitioner, or a paramedic are comprehensively exempt from GST. This exemption covers diagnosis, treatment, and care for illness, injury, deformity, abnormality, or pregnancy and applies equally to Indian and foreign patients.

Practical Example:

A foreign patient undergoing a kidney transplant at a Mumbai hospital pays Rs. 8,00,000 covering surgery, anaesthesia, nursing, medicines, and room rent. The entire amount is GST exempt. No GST should appear on the hospital invoice.

Services That Attract GST in the Medical Tourism Context

Service Type	GST Rate	Notes
Core healthcare services (inpatient/outpatient)	Exempt (0%)	Notification 12/2017-CT(Rate)
Medical facilitation / coordination services	18%	Third-party agent services to foreign patients
Cosmetic / aesthetic surgery (non-medical)	18%	Not covered by healthcare exemption
Spa, wellness, yoga packages (non-clinical)	18%	Unless part of clinical treatment protocol
Hotel accommodation for patients	12%–18%	Depends on daily tariff
Air ambulance services	5%	Specific pharmaceutical/medical rate

Export of Services and Zero-Rating: Unlocking GST Refunds

When a hospital provides healthcare to a foreign patient and receives payment in foreign currency, the supply qualifies as ‘export of services’ under Section 2(6) of the IGST Act if four conditions are met: (1) the supplier is in India, (2) the recipient is outside India, (3) the place of supply is outside India, and (4) payment is received in foreign exchange.

Zero-rating entitles the hospital to claim a refund of all Input Tax Credit (ITC) paid on inputs and input services a significant financial benefit that the majority of hospitals currently fail to leverage. The refund mechanism requires filing Form GST RFD-01 along with the FIRC, a Letter of Undertaking (LUT filed annually in Form GST RFD-11), and patient admission records.

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Compliance Checklist: Medical Tourism Stakeholders 2026

For Hospitals and Clinical Establishments

• Maintain current NABH or JCI accreditation as required by the government’s medical tourism empanelment policy.
• Register as a service exporter with your Authorised Dealer bank and update FEMA compliance documentation annually.
• Obtain and archive FIRC for every foreign currency receipt this is mandatory for both FEMA compliance and GST export-of-service refunds.
• File LUT annually on the GST portal before raising invoices in foreign currency to avoid IGST on exports.
• File GSTR-1, GSTR-3B, and GST RFD-01 correctly for all zero-rated supply periods.
• Never charge GST on core healthcare services verify each billing line item against the exemption notification.

For Medical Tourism Facilitators and Agents

• Register under GST if annual turnover from facilitation services exceeds Rs. 20 lakh (Rs. 10 lakh for special category states).
• Charge 18% GST on all coordination and facilitation fees this is mandatory and non-negotiable.
• Ensure all commission income from foreign principals is received through AD bank channels and documented.
• Maintain written patient referral agreements with overseas principals essential for FEMA and GST documentation.

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The Three Most Costly Compliance Mistakes in Medical Tourism

Mistake 1: Charging GST on Exempt Healthcare Services

Adding GST to inpatient hospital bills is both legally incorrect and creates patient dissatisfaction. Every billing line item must be verified against the healthcare exemption notification before any GST is applied.

Mistake 2: Failing to Claim Export-of-Service GST Refunds

Hospitals that treat foreign patients and receive foreign currency are entitled to ITC refunds on all inputs. Failing to file RFD-01 means forfeiting substantial refunds often running into lakhs per financial year.

Mistake 3: Non-Compliance with FEMA Reporting Timelines

Delayed conversion of foreign currency or failure to report receipts to the AD bank are FEMA violations. The Enforcement Directorate can levy penalties and initiate adjudication proceedings. Voluntary compounding under Section 15 of FEMA before the ED initiates action is always the preferred path.

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Conclusion: Compliance Is Not Optional It Is Competitive Advantage

Medical tourism is one of India’s most promising growth sectors, but it operates in a tightly regulated environment. Hospitals and facilitators that build robust FEMA and GST compliance frameworks not only protect themselves from enforcement action they build the institutional credibility that attracts international patients and overseas referral partnerships.

For specialised guidance on FEMA compliance audits, GST refund filings, and structuring agreements with overseas medical facilitators, consult Adwani & Company. Visit www.itradvisor.in to schedule a consultation.

Frequently Asked Questions

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Dr. Haresh Adwani is a PHD Holder In commerce with  20 years of experience in income tax compliance, NRI taxation, international financial advisory, and tax notice resolution.  Medical tourism Tax advisor Pune,

Services: ITR filing • Tax notice resolution • AIS reconciliation • NRI taxation • Financial footprint analysis • Penalty reduction & negotiation

Schedule a consultation: Adwani & Company  Where compliance meets clarity.

Introduction: GST Compliance Is Not a Once a Year Exercise

India’s GST system governed by the CGST Act 2017, IGST Act 2017, and SGST laws operates on a multi-rate structure (5%, 12%, 18%, 28%) with mandatory monthly and quarterly filings, automated data matching, and increasing use of AI-powered scrutiny tools by the GSTN. In 2026, a compliance gap that might have gone unnoticed three years ago now triggers an automated show cause notice within weeks.

This guide authored by Dr. Haresh Adwani, a GST practitioner with over 20 years of advisory experience provides the 7 compliance rules every GST registered business must follow, a complete filing schedule, and a practical framework for staying penalty free in FY 2026-27.

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Rule 1: Know the Law Understand GST Rates, Exemptions, and ITC Rules

The most powerful defence against a GST Show Cause Notice (SCN) is understanding the law better than the notice that arrives. Businesses must correctly identify which GST rate applies to their specific goods or services, which exemptions under CGST notifications apply, and what Input Tax Credit (ITC) conditions must be satisfied under Sections 16 and 17.

Incorrect rate application for example, charging 12% on a service that should attract 18%, or incorrectly claiming the healthcare exemption on a taxable service is one of the most common automated notice triggers in 2026. Build a product/service tax matrix for your business and review it every time the GST Council issues notifications.

Rule 2: Consistency File Returns on Time, Every Filing Period Without Exception

GST compliance is built on consistent, on-time filing of GSTR-1, GSTR3B, GSTR9, and GSTR9C. A single missed filing cascades into data mismatches, ITC blocks for your buyers, automated GSTR-3A non-filing notices, and GSTIN suspension risk.

Practical Example On-Time Filing Value A Mumbai textile trader with Rs. 25 lakh monthly turnover pays approximately Rs. 4.5 lakh in GST per month. Consistent on-time filing avoids: late fees of Rs. 50 per day per return (Rs. 20 for Nil returns), 18% p.a. interest on unpaid tax, GSTIN suspension, and downstream ITC denial for buyers. One missed GSTR-3B can cascade into mismatches, demand notices, and interest liability. Consistency is your lowest-cost compliance strategy.

Rule 3: Team Coordination Reconcile Your ITC Against GSTR-2B Every Month

Your ITC claims in GSTR3B must reconcile with the auto-populated GSTR-2B data on the GST portal. Any gap whether because a supplier has not filed GSTR1, filed it late, or reported an incorrect invoice triggers automated discrepancy notices under Section 61 of the CGST Act.

Monthly reconciliation between your purchase register, GSTR-2B data, and GSTR3B filings is the single most effective habit to prevent ITC-related demand notices before they are issued. Where a supplier has consistently not filed, consider reversing provisional ITC under Section 16(2) to eliminate the mismatch risk.

Rule 4: Adapt Stay Current with GST Amendments, Notifications, and Circulars

Since GST’s implementation in July 2017, the legal landscape has evolved continuously rate changes, new notifications, CBIC circulars, Advance Ruling Authority (AAR) decisions, and Supreme Court judgments all affect your GST liability. Businesses that apply outdated rates or expired exemptions face demand notices for the differential tax plus interest.

Subscribe to CBIC notification alerts, track GST Council recommendations, and review your tax matrix every time a major notification is issued. Adwani & Company maintains a live amendment tracker for all advisory clients.

Rule 5: Perform Under Pressure Respond to GST Notices Correctly and on Time

Receiving a GST Show Cause Notice is a high-pressure moment for any business. The correct response requires: filing within the stipulated timeline, addressing each allegation individually with documentary evidence, citing the applicable legal provisions and CBIC circulars, referencing favourable High Court and Tribunal judgments, and where genuine liability exists opting for voluntary payment with interest to reduce penalty exposure under Section 73.

Ignoring a GST notice results in an ex-parte demand order. Panic driven incomplete responses worsen your position. Engage a qualified GST practitioner immediately upon receiving any show cause notice or DRC-01A pre-notice intimation.

Rule 6: Build Infrastructure E Way Bills, E Invoicing, and Clean Audit Trails

GST compliance infrastructure the systems that generate and archive e way bills, e invoices, and accounting records is not optional. The stakes are high:

• E-way bill violations (goods movement above Rs. 50,000 without a valid e-way bill) attract a penalty equal to 100% of the tax due on the consignment.
• E-invoicing is mandatory for all registered taxpayers with aggregate turnover above Rs. 5 crore in any financial year from FY 2017-18 onwards. Lapses lead to ITC denial for your buyers damaging your commercial relationships.
• A clean, reconcilable accounting system that generates audit trails matching your GST returns is your primary defence in any scrutiny or audit.

Rule 7: Leadership GST Accountability Starts at the Top

Under Section 89 of the CGST Act, every person in charge of the conduct of business directors, partners, and the karta of HUFs can be held personally liable for the entity’s GST dues in cases of non-compliance. GST compliance is not solely the accountant’s responsibility; it begins with the business owner and promoter.

Businesses where leadership treats GST compliance as an operational priority not an annual afterthought consistently avoid notices, penalties, and business disruption.

Also Read:

https://itradvisor.in/blog/gst-show-cause-notice-2026https://itradvisor.in/blog/gst-show-cause-notice-2026

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GST Filing Mistakes Businesses Must Eliminate in 2026

Common Mistake	Consequence	Prevention
Incorrect GST rate application	Tax demand + interest + penalty	Build and maintain a product/service tax matrix
GSTR-1 vs GSTR-3B mismatch	Section 61 scrutiny notice	Reconcile before filing each return
Excess or unsupported ITC claim	ITC reversal demand + 18% interest	Verify against GSTR-2B before claiming
Late filing of GSTR-1 / GSTR-3B	Late fees + GSTIN suspension risk	Automate reminders; use a GST compliance calendar
Ignoring GST notices	Ex-parte demand order	Engage a GST practitioner within 48 hours of receipt
Not reconciling ITC monthly	Mismatches trigger automated notices	Monthly purchase register vs GSTR-2B reconciliation
Errors in e-invoicing / e-way bills	Penalties + ITC denial for buyers	Use GSTN-approved software with auto-validation

GST Compliance Checklist India 2026: Complete Filing Schedule

Return / Obligation	Frequency	Due Date
GSTR-1 (Outward Supplies)	Monthly / Quarterly (QRMP)	11th of following month / Quarterly
GSTR-3B (Tax Payment Return)	Monthly	20th / 22nd / 24th (category-based)
GSTR-9 (Annual Return)	Annual	31st December of following FY
GSTR-9C (Reconciliation Statement)	Annual (turnover >Rs. 5 crore)	31st December of following FY
E-way Bills	Per consignment	Before goods movement commences
E-invoicing	Per transaction (turnover >Rs. 5 crore)	Real-time reporting to IRP
LUT (Letter of Undertaking)	Annual (exporters)	Before first export invoice of the FY