GST SCHEME
Composition or Regular GST?
Find which GST scheme is more beneficial for your business.
Composition Scheme
Low tax rate (1-6%), simple compliance, no Input Tax Credit
Regular Scheme
Standard tax rates (5-28%), monthly returns, Input Tax Credit available
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Quick Comparison
| Feature | Composition Scheme | Regular Scheme |
|---|---|---|
| Tax Rate | 1% (trading), 5% (restaurant), 6% (other) | 5%, 18%, 28% (as per HSN) |
| Turnover Limit | Up to ₹1.5 crores (₹75L services) | No limit |
| Input Tax Credit | ❌ Not available | ✓ Available |
| Returns | Quarterly (simple) | Monthly (detailed) |
| Interstate Supply | ❌ Not allowed | ✓ Allowed |
| E-commerce | ❌ Not allowed | ✓ Allowed |
Frequently Asked Questions
What is GST Composition Scheme?
GST Composition Scheme is a simple tax scheme for small businesses with turnover up to ₹1.5 crores (₹75 lakhs for services). It offers lower tax rates (1-6%) but no Input Tax Credit (ITC) and quarterly returns.
Who is eligible for Composition Scheme?
Businesses with turnover up to ₹1.5 crores (₹75 lakhs for services in some states) can opt for composition scheme. Not eligible: interstate suppliers, e-commerce sellers, manufacturers of notified goods, and casual taxable persons.
What are the tax rates under Composition Scheme?
Manufacturers and traders: 1% of turnover. Restaurants (without alcohol): 5% of turnover. Other suppliers (services): 6% of turnover. No separate CGST/SGST calculation needed.
Can I claim Input Tax Credit (ITC) in Composition Scheme?
No, composition dealers cannot claim Input Tax Credit on purchases. This is the biggest limitation. If you have high input costs, Regular scheme may be more beneficial despite higher tax rates.
How often do I need to file returns under Composition Scheme?
Quarterly return (CMP-08) due by 18th of month following quarter, and annual return (GSTR-4) once a year. Much simpler than monthly returns in Regular scheme.
Can I switch from Regular GST to Composition Scheme?
Yes, you can switch from Regular to Composition scheme at the start of any financial year by filing intimation in Form GST CMP-02 before the deadline (usually March 31st).
Can I supply goods to other states under Composition Scheme?
No, interstate supply (supply to other states) is not allowed under Composition Scheme. You must opt for Regular scheme if you do interstate business.
What type of invoice should composition dealers issue?
Composition dealers must issue Bill of Supply (not tax invoice). They cannot collect GST separately from customers and must mention 'composition taxable person, not eligible to collect tax on supplies' on invoices.
Can I sell on e-commerce platforms under Composition Scheme?
No, e-commerce sellers (selling through Amazon, Flipkart, etc.) cannot opt for Composition Scheme. E-commerce requires Regular GST registration.
What happens if my turnover exceeds ₹1.5 crores?
If turnover exceeds ₹1.5 crores in a financial year, you must switch to Regular scheme from the day you cross the limit. File Form GST CMP-04 within 7 days and start paying GST under Regular scheme.
Is Composition Scheme better for retail shops?
Composition scheme is ideal for retail shops selling to end consumers (B2C) with good margins and low input costs. If you sell mostly to businesses (B2B), Regular scheme is better as your customers need ITC.
Can service providers opt for Composition Scheme?
Yes, service providers with turnover up to ₹50 lakhs (₹75 lakhs in special category states) can opt for Composition Scheme at 6% tax rate. However, they cannot provide interstate services.
Do I need to maintain books of accounts under Composition Scheme?
Yes, composition dealers must maintain simple books of accounts showing purchases, sales, and stock. However, detailed records required for ITC are not needed, making it simpler than Regular scheme.
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