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.
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