GST Composition vs Regular Scheme
Enter turnover and purchase profile to see whether composition or regular GST leaves more money with you.
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How it works
Two ways to pay GST — the right one depends on your margins and customers:
- Composition: flat 1–6% of turnover, quarterly returns, minimal compliance. But: no input tax credit, no interstate sales, no e-commerce, and you can't issue ITC invoices.
- Regular: full GST with input tax credit — you pay tax only on your value addition. Monthly/bi-monthly returns, more compliance.
- High margins → composition: if you buy little (services, high value-add), the flat rate beats net GST.
- Low margins → regular: traders with heavy purchases recover big ITC — composition's flat rate taxes your turnover, not your margin.
- B2B customers: they want ITC invoices. Composition dealers can't give them — a commercial dealbreaker regardless of tax math.
Frequently asked questions
What is the GST composition scheme?
A simplified scheme: pay 1–6% flat tax on turnover with quarterly returns, but no input tax credit and no interstate sales.
Who can opt for composition?
Turnover up to Rs 1.5cr (Rs 75L in special states); services up to Rs 50L. Excludes e-commerce sellers and interstate suppliers.
What are the composition rates?
1% for traders/manufacturers, 5% for restaurants, 6% for services — on total turnover.
When does regular scheme win?
When input tax credit is large — low-margin traders with heavy taxable purchases usually pay less under regular GST.
Can composition dealers issue tax invoices?
No — they issue bills of supply without ITC. B2B customers who need ITC will go elsewhere.
Can I switch schemes?
Yes, at the start of a financial year (with conditions). Switching mid-year has restrictions.
Is e-commerce allowed under composition?
No — selling through e-commerce operators bars you from the composition scheme.
What returns do composition dealers file?
Quarterly CMP-08 for payment plus annual GSTR-4 — far lighter than regular monthly filings.
Does composition save compliance cost?
Yes — fewer returns and no invoice-level ITC matching. For small B2C businesses the saving is real.
Should a restaurant choose composition?
Often yes at 5% — restaurants have limited ITC anyway (and can't claim it on many inputs), and customers are B2C.