Composition Scheme vs Regular GST: Which Suits a Small Shop?
Published: 10/9/2026
Category: GST
The composition scheme means simpler returns and a fixed tax rate, but no input tax credit and no GST collected from customers. A clear comparison to help small shops decide with their CA.
The GST composition scheme lets eligible small businesses pay tax at a fixed percentage of turnover with simpler, less frequent returns. In exchange, they cannot collect GST from customers, cannot claim input tax credit and face restrictions such as no inter-state outward supplies of goods. Whether it saves you money depends on who your customers are and how much GST you pay on purchases.
Side-by-side comparison
| Composition scheme | Regular GST |
|---|
| Eligibility | Turnover within the scheme limit (for goods, generally ₹1.5 crore; lower in special category states). Not all businesses qualify | Any registered business |
| Tax paid | Fixed percentage of turnover | GST collected on sales minus input tax credit |
| Collect GST from customers | No; issue a bill of supply | Yes; issue tax invoices |
| Input tax credit | Not available | Available |
| Inter-state outward supply of goods | Not allowed | Allowed |
| Returns | Simpler, less frequent | Monthly or quarterly filings |
| Business customers | Cannot claim credit on your bills | Can claim credit |
Who it often suits
- Small retailers selling mainly to consumers (who cannot use input credit anyway)
- Businesses with low GST on purchases relative to sales
- Owners who want simpler compliance
- Restaurants within the eligibility rules
Who should usually stay regular
- Businesses selling mainly to other businesses that want input tax credit
- Businesses with high GST on purchases (credit lost under composition)
- Anyone planning inter-state sales of goods or significant e-commerce sales
- Businesses close to the turnover limit
A quick way to compare
Ask your CA to estimate last year's tax under both options:
- Regular: GST on sales minus input tax credit on purchases
- Composition: the scheme rate on eligible turnover, with no credit
Then add the value of simpler compliance and the impact on business customers.
Timing
Opting in is generally done at the start of a financial year, by intimation on the GST portal within the prescribed time. Check the current deadline before 1 April.
Where BizFlow fits
BizFlow supports both: bills of supply with the required composition declaration, or full tax invoices for regular taxpayers, and can switch at the start of a financial year. See GST billing.
General information; confirm eligibility, rates and timing with your CA.
Frequently asked questions
Q: Can a composition dealer charge GST on the bill?
A: No. Composition dealers issue a bill of supply and do not collect GST from customers.
Q: Can composition dealers claim input tax credit?
A: No. Input tax credit is not available under the composition scheme.
Sources
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