The composition scheme trades paperwork for a flat tax — attractive for small traders, but it has hidden costs that make it wrong for many businesses. Here's the full picture.
Who can opt in
- Manufacturers and traders with aggregate turnover up to ₹1.5 crore (₹75 lakh in special category states).
- Restaurants (not serving alcohol).
- Service providers up to ₹50 lakh under the special composition for services.
Tax rates under composition
- Traders and manufacturers — 1% of turnover (0.5% + 0.5%).
- Restaurants — 5% (2.5% + 2.5%).
- Service providers (₹50L scheme) — 6% (3% + 3%).
The trade-offs
- You cannot collect GST from customers — the tax comes out of your margin.
- You cannot claim input tax credit on purchases.
- You cannot make inter-state sales.
- You cannot sell through e-commerce operators that collect TCS.
- 'Composition taxable person' must be displayed on your signboard and bills of supply.
When composition makes sense — and when it doesn't
It works for local B2C businesses with low input costs (kirana stores, small eateries). It usually hurts B2B businesses — your buyers can't claim credit on your bills, so registered customers prefer regular suppliers. If most customers ask for a 'GST bill', stay in the regular scheme.
Filing under composition
Quarterly payment via CMP-08 and one annual return GSTR-4 — far lighter than monthly returns. Whichever scheme you choose, BizGST Pro handles the correct invoice format (tax invoice vs bill of supply) automatically.