Flat 1–6% tax with almost no paperwork, or full GST with input credit? Here’s which scheme actually fits your business.
Quick answer: The Composition Scheme suits small, mostly-B2C businesses (turnover up to ₹1.5 crore for goods, ₹50 lakh for services) that want a low flat tax and minimal filing. The Regular Scheme suits B2B, inter-state or growing businesses that need to claim input tax credit and issue tax invoices. If your buyers need ITC, or you sell across states, choose Regular.
| Feature | Composition Scheme | Regular SchemeFor B2B / growth |
|---|---|---|
| Turnover limit | ₹1.5 cr goods / ₹50 L services | No upper limit |
| Tax rate | Flat 1% (traders/mfg), 5% (restaurants), 6% (services) | Slab-wise: 5% / 12% / 18% / 28% |
| Input Tax Credit (ITC) | Not allowed | Allowed |
| Charge GST to customers | No (out of own pocket) | Yes |
| Invoice type | Bill of supply | Tax invoice |
| Inter-state outward sales | Not allowed | Allowed |
| Returns per year | 5 (4 CMP-08 + 1 GSTR-4) | 24+ (monthly GSTR-1 + 3B) |
| Buyer can claim ITC from you | No | Yes |
| Best for | Small B2C / local traders | B2B, inter-state, growing businesses |
You’re a small, local, mostly-B2C business within the turnover limit, a shop, small manufacturer or restaurant, and you value low tax + minimal filing over input credit.
You sell B2B (your buyers need ITC), sell across states, sell online, or expect to grow past the limit, the regular scheme lets you claim ITC and issue tax invoices.
Composition looks attractive, a flat 1–6% and just five filings a year instead of 24+. But there are real trade-offs: you can’t claim input tax credit, you can’t charge GST to customers (you pay it from your own margin), you can’t sell inter-state, and crucially, your B2B buyers can’t claim ITC on purchases from you, which can make you uncompetitive for business customers.
For a purely B2C local business, none of that matters and Composition is a great deal. For anyone selling to businesses or across states, Regular is usually the right call.
The right choice depends on your buyer mix, margins and growth plans. A Govyapar CA runs the actual numbers for your business — comparing your composition tax against the ITC you’d claim under regular, so you pick the scheme that genuinely costs you less, and we handle the opt-in either way.
₹1.5 crore for traders, manufacturers and restaurants (₹75 lakh in special category states), and ₹50 lakh for service providers.
No — composition dealers cannot claim ITC, and their buyers cannot claim ITC on purchases from them either.
Just five a year — four quarterly CMP-08 statements and one annual GSTR-4 — versus 24+ monthly returns under the regular scheme.
Usually no — businesses selling through e-commerce operators generally can’t use composition and must register under the regular scheme.
A CA compares both for your business and sets up the right one.
Get a free consult →