## Ineligibility for Composition Scheme

A person shall NOT be eligible to opt for any composition scheme (whether u/s 10(1), 10(2), or 10(2A)) in the following situations:

### (1) Non-Taxable Supply

Supplies goods or services which are not liable to tax under GST (i.e., makes any non-taxable supply such as petroleum products, alcohol for human consumption).

### (2) Inter-State Outward Supplies

Makes any inter-state outward supplies. Even one inter-state supply makes the person ineligible.

Note: Inter-state INWARD supplies are allowed; only outward inter-state is barred.

### (3) Supply through E-Commerce Operator (ECO)

Supplies any service through an ECO who is required to collect TCS u/s 52.

Carve-out: Supply of goods through ECO IS allowed (the person remains eligible).

### (4) CTP or NRTP

Is a Casual Taxable Person (CTP) or Non-Resident Taxable Person (NRTP).

### (5) Manufacturer of Specified Goods

Is engaged in manufacturing of these specified goods (during current OR preceding FY):

Fly ash bricks, fly ash aggregate or fly ash blocks
Bricks of fossil meal and building bricks
Earthen or roofing tiles
Ice cream and other edible ice
Pan masala
All tobacco goods and tobacco substitutes
Aerated water

### (6) Turnover Exceeding Threshold During Current FY

If aggregate turnover exceeds the applicable limit (₹1.5 Cr / ₹75 lacs / ₹50 lacs) during the current FY, the person ceases to be eligible from that date of crossing.

### Quick Summary Table

Disqualifier	Triggers ineligibility?
Non-taxable supplies (alcohol, petrol)	Yes
Inter-state outward supply	Yes
Service via ECO collecting TCS	Yes
Goods via ECO collecting TCS	No (allowed)
Being CTP/NRTP	Yes
Manufacturing aerated water/tobacco/ice-cream/pan masala/etc.	Yes
Aggregate turnover > threshold in current FY	Yes (from date of crossing)

Worked example

### Example 1

Example 1: Mr. A is a trader in Mumbai (aggregate turnover ₹1 Cr) who occasionally sells to customers in Gujarat (inter-state).

→ Not eligible for composition (makes inter-state outward supplies).

### Example 2

Example 2: Mr. B sells handicrafts through Amazon (ECO collecting TCS).

→ Eligible for composition (selling goods through ECO is allowed).

### Example 3

Example 3: Mr. C provides consultancy through Urban Company (ECO collecting TCS).

→ Not eligible for composition (services through ECO disqualifies).

### Example 4

Example 4: Mr. D manufactures ice cream with aggregate turnover ₹40 lacs.

→ Not eligible for composition (ice cream manufacturer barred).

### Example 5

Example 5: Mr. E (composition dealer u/s 10(1)) crosses ₹1.5 Cr turnover on 15-Oct-2025.

→ Ceases to be composition dealer from 15-Oct-2025; must switch to regular scheme.

⚠️ Common exam mistakes

Allowing composition dealer to make occasional inter-state outward supplies - even one disqualifies
Confusing services through ECO (disqualifies) with goods through ECO (allowed)
Allowing ice cream / pan masala / aerated water manufacturers to opt for composition - they are barred
Forgetting that CTP and NRTP cannot opt for composition by their very nature
Continuing as composition dealer after crossing turnover threshold - ineligibility kicks in from date of crossing
Allowing supplier of exempt-only supplies that include 'non-taxable' supplies (e.g., petrol dealer) - non-taxable supply disqualifies

Bare-Act text Proviso to Section 10(2) and Section 10(2A) · CGST Act, 2017 · click to expand

Provided that the registered person shall not be eligible to opt for payment of tax under sub-section (1) or sub-section (2A), as the case may be, if such person is: (a) engaged in the supply of services not leviable to tax under this Act; (b) engaged in making any inter-State outward supplies; (c) engaged in making any supply of goods or services through an electronic commerce operator who is required to collect tax at source under section 52, except supply of goods through such ECO; (d) a manufacturer of such goods as may be notified by the Government; (e) a casual taxable person or a non-resident taxable person.

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Persons Ineligible to Opt for Composition Scheme

Worked example

⚠️ Common exam mistakes