GST
GST Composition Scheme vs Regular Registration: Which One for Your Business?
Small businesses face this choice at registration: the Composition Scheme (flat low tax, minimal compliance) or Regular registration (full ITC, full flexibility). The brochure version makes composition sound obvious — the practical answer depends on who you sell to.
Composition scheme at a glance
- Eligibility: Turnover up to ₹1.5 crore (₹75 lakh in special category states); services up to ₹50 lakh under the 6% scheme
- Rates: 1% for traders/manufacturers · 5% for restaurants (non-alcohol) · 6% for eligible service providers
- Compliance: Quarterly CMP-08 payment + one annual GSTR-4 — versus up to 25+ filings for monthly regular filers
The four restrictions that decide everything
- No input tax credit. The GST you pay on purchases, rent and services becomes pure cost.
- No inter-state sales. Composition dealers can only sell within their state.
- No e-commerce sales through marketplaces that collect TCS (Amazon, Flipkart).
- Cannot charge GST on invoices — you pay tax out of your own margin, and your B2B buyers get no credit, making you less attractive to business customers.
The math that matters
A trader with ₹80 lakh turnover and ₹60 lakh purchases (18% GST goods):
- Composition: tax = 1% × 80L = ₹80,000, but loses ITC of ₹10.8L… wait — he never charged GST either. Real cost = ₹80,000 from margin + ₹10,80,000 input GST embedded in cost.
- Regular: collects ₹14.4L on sales, claims ₹10.8L credit, pays ₹3.6L net — all charged to customers, not from margin.
For B2B-heavy businesses, regular almost always wins. Composition shines for B2C local businesses with low input GST — kirana stores, small restaurants, local services where customers don't claim credit anyway.
Quick decision table
| Your situation | Choose |
|---|---|
| Sell to businesses (B2B) | Regular — buyers need your GST credit |
| Sell on Amazon/Flipkart | Regular — composition not allowed |
| Sell outside your state | Regular — composition not allowed |
| Local B2C shop/restaurant, low input GST | Composition — simplicity wins |
| High input GST (heavy purchases/rent) | Regular — ITC is your margin |
Switching later
You can switch composition→regular anytime (mandatory if you cross limits), and regular→composition only from the start of a financial year (CMP-02 before 31 March). Stock-credit adjustments apply both ways — plan the transition, don't stumble into it.
Still deciding? Tell us your customer mix and we'll recommend the right scheme on a free call — then handle the registration end to end. Already registered and drowning in returns? See expert return filing.