Composition Scheme Overview
The composition scheme offers simplified compliance for small businesses with turnover up to ₹1.5 crore (₹75 lakh for some states). You pay a fixed percentage of turnover instead of detailed GST returns.
Benefits
- Quarterly returns instead of monthly
- Reduced compliance burden
- Lower tax rates for eligible businesses
- No need to collect GST from customers (in most cases)
Limitations
- No input tax credit on purchases
- Cannot supply inter-state
- Cannot sell through e-commerce platforms
- Cannot issue tax invoices (only bill of supply)
When to Choose
Composition works well when your margins are high and purchase costs are low. If you buy heavily from organized suppliers, regular scheme with ITC may be more beneficial. Run the numbers before deciding.
Conclusion
Composition is a trade-off between simplicity and input credit. As your business grows, evaluate whether switching to regular GST makes financial sense.