The core trade-off
Regular GST and the composition scheme solve the same compliance problem in opposite ways. Regular registration means charging GST on invoices, claiming input tax credit, and filing monthly. Composition means paying a small flat percentage of turnover, no input credit, and light quarterly filing. Simplicity vs flexibility — that’s the choice.
Tax and credit
Under composition you pay a flat rate on turnover — 1% for traders and manufacturers, 5% for restaurants — out of your own margin, because you can’t collect GST from customers. You also can’t claim input credit on your purchases. Under the regular scheme you collect GST from customers and offset it with credit on your inputs, so the tax largely passes through rather than eating your margin.
The dealbreakers for composition
Composition has hard restrictions that rule it out for many businesses:
- No inter-state sales — you can only supply within your state
- No selling through e-commerce platforms
- No input tax credit for you, and none for your buyers (you issue a bill of supply, not a tax invoice)
- Turnover ceiling — generally ₹1.5 crore for goods, ₹50 lakh for the service option
Who each one suits
Composition fits a small, local, B2C business — a neighbourhood shop or a standalone restaurant — that buys within the state, sells to end consumers, and values minimal paperwork. Regular registration fits anyone selling B2B (your buyers need the credit), selling online, supplying across states, or wanting to claim input credit on significant purchases.
How to decide
The deciding question is usually your customers. If they’re businesses that need input credit, composition quietly costs you sales — so regular is better. If they’re walk-in consumers and you’re purely local, composition can genuinely simplify life. We look at your customer mix and turnover and give you a straight recommendation, and handle opting in or out either way.